- Date : 03/07/2023
- Read: 3 mins
With an import duty hike, propane gas would become dearer affecting its market share. As it was a major competition for Gujarat Gas, the company stands to gain from the price hike.
- Import duty on commercially-used propane gas increased to 19.25% from the previous 2.75%
- The increased duty would make propane gas dearer which is now priced at ₹32-₹33 per scm.
- The price hike would adversely affect propane gas’s market demand and help Gujarat Gas increase demand
- As Gujarat Gas is expected to gain from the import duty hike, its stock is in focus
The Government recently raised the import duty on propane to 19.25% which might cause a hike in the gas price too. Currently, propane is priced at ₹32-₹33 per square cubic meter (scm). After the hike in duty, the price might go up by ₹5 to ₹6.
How Gujarat Gas Benefits?
Compared to propane’s existing price, Gujarat Gas was sold at ₹38.6 per scm. Being dearer than propane, in the Morbi region of Gujarat, propane was Gujarat Gas’s major competition.
With the recent change, propane’s hiked prices would equal Gujarat Gas prices thereby levelling the field. Gujarat Gas can capture propane’s market share.
Gujarat Gas can now justify its volumes as propane prices weaken. In August 2023, the price of propane is expected to fall to $400 per tonne. In July 2023, the price stood at $450 per tonne. The international firm Jefferies highlighted the weakening position of propane in the first quarter of the financial year 2023-24. It expects the prices to fall further in the second quarter too.
Gujarat Gas Financial Performance
As Gujarat Gas benefits from propane’s price hike, here’s a look at its previous financial performance –
- In the last quarter of the financial year 2022-23, the company reported a 16% Year-on-Year (YoY) fall in its net profit. The absolute amount stood at ₹369 crores compared to ₹444 crores in the third quarter.
- The revenue from operations also fell by 14% YoY to amount to ₹4074.
- The sales volume jumped 22% to stand at 8.86 mmscmd
Gujarat Gas Stock Target
According to experts, the stock of the company is expected to hit a target price of ₹557.50 in the coming 12 months. Compared to the current market price, the target price is 13% higher.
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The bottom line
As Gujarat Gas stocks are expected to rally in the coming months, you can invest in the company and enjoy the rally. Assess the financial performance of the company before you invest. This would help you avoid unnecessary risks and reap the rewards too.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.