ADANI TOTAL GAS LTD

AGL is engaged in City Gas Distribution (CGD) business and supplies natural gas to domestic, commercial, industrial and vehicle users.

Revenue Breakup

CNG Sales – 54%

PNG Sales – 45%

Other-1%

Shareholding Pattern

-PUBLIC GROUP

-PROMOTER GROUP

Financial Summary

Synopsis of Financials

• CNG volumes grew by 24% in Q3 and 21% in the nine-month period
• PNG volumes grew by 15% in Q3 and 1% in the nine-month period
• Revenue from operations increased by 5% in Q3
• EBITDA increased by 26% in Q3 to Rs. 301 crores
• Profit before tax increased by 15% and profit after tax increased by 16% in Q3
• EBITDA increased by 20% to Rs. 846 crores in the nine-month period
• PBT and PAT grew by 14% and 15% respectively in the nine-month period.

Final Outlook

Key Financial Metrics:

Revenue Growth: Adani Total Gas has shown consistent growth in revenue over the past years, but more recently, it has been facing challenges. For FY23, revenue was approximately ?4,167 crores, indicating solid business expansion.

Earnings per Share (EPS): For FY2023, the company reported an EPS of 4.97, up from 4.63 in FY2022. This shows steady earnings growth despite external challenges.

Profit Margins: The company has maintained strong profit margins, particularly in its gas distribution segment. However, there has been some pressure in the margins due to regulatory changes and increased cost of gas acquisition.

Return on Capital Employed (ROCE): Adani Total Gas’ ROCE stands at an impressive 21%, signaling the company’s ability to generate returns efficiently on the capital employed, which is higher than the industry average.

Valuation:

Price-to-Earnings (P/E) Ratio: The current P/E ratio for Adani Total Gas is high, reflecting premium valuations due to investor confidence in its growth prospects. However, this could also be a risk if earnings do not meet expectations.

Valuation Concerns: Given the recent stock volatility linked to global gas price fluctuations and sector-specific regulatory changes, the stock appears overvalued compared to peers in the CGD industry.

Expansion: Adani Total Gas continues to expand its city gas distribution network, benefiting from government policies encouraging the use of cleaner fuels.

Government Support: India’s push for clean energy adoption underpins future growth, as natural gas is seen as a bridge fuel to achieve lower carbon emissions.

Conclusion Based on Combined Fundamental and Technical Analysis:

From a technical perspective, the stock is currently in a bearish phase. Combined with its high valuation, it may not be the best time for entry unless it shows strong support around current levels. On a broader scale, long-term investors with a high-risk tolerance could view this as a buying opportunity, provided the stock stabilizes and fundamentals remain intact.