Morgan Stanley (MS) has reiterated its ‘Overweight’ rating on Gujarat Gas (GGAS) with a target price of ₹614, following the company’s decision to increase CNG prices by ₹1.5/kg, marking a 2% price hike. This move aligns with similar price adjustments by peers in the natural gas sector for vehicle fuel.
The brokerage anticipates this to be the first of three to four incremental price hikes over the coming months. However, MS notes that if state and federal taxes on natural gas are rationalized, further price hikes may not be necessary. It’s worth noting that CNG constitutes a smaller portion, roughly 25%, of Gujarat Gas’s sales volumes.
MS also highlighted that the reallocation of nearly half of the domestic cheaper gas production in favor of petrochemicals could impact the cost dynamics. While Gujarat Gas remains a solid player, the brokerage expressed a preference for GAIL and Reliance Industries over Gujarat Gas due to their broader market positioning and potential growth opportunities.
