Adani Group Analysis : Adani Total Gas Limited

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Part 3 of our series explaining Adani Group Companies. That one covers the business of Adani Total Gas Limited.

Part 1 of our series explaining Adani Group Companies. That one covers the business of Adani Ports and SEZ limited. Click on the link to visit there.

Part 2 of our series explaining Adani Group Companies. This one covers the business of Adani Green Energy Limited.

Read all the post in Adani Series here : Adani Group Analysis

Adani Group

Refer Part 1 of the series for more info about the adani group.

Adani Total Gas Limited

Adani Total Gas also known as ATGL is the largest city gas distributor in India in terms of area under operations. Currently the company is selling approx. 60-70% of gas in two geographical areas. But soon there are other 15 geographicals areas which will gain its share in the revenue.

After the 9th and 10th round of city gas auction, the company has currently 19 geographical areas. Company has set up a joint venture with Indian Oil, in the name of IOAG Private Limited which currently supplies gas to seven geographical areas. After the 9th and 10th round of city gas auction, the company has currently 19 geographical areas. Indeed ATGL group has licence to supply gas in 38 geographical areas , 19 GA on its own account and 19 GA in IO-AG Private Limited.

Snapshot

Market Cap

₹ 1,39,137 Cr.

Current Price

₹ 1,265.00

Book Value

₹ 17.8

High / Low

₹ 1320 / 96.6

EPS

₹ 4.29

PE Ratio

288

Dividend Yield

0.02 %

PB Ratio

71.2

RoE

28.1 %

RoCE

31.9 %

adani total gas share price

Adani Total Gas ( ATGL ) 5-year stock price chart

adani total gas 5 year performance
Source: Stockedge (% in Return )
adani total gas business model

City Gas Distribution is a near monopoly business with no control over selling price. Adani Total Gas is well positioned to capture India’s growing need of LNG ( Liquefied natural gas ).

In India, Natural Gas compromises 6% of total country energy mix due to low per capita consumption. Government has set the target of making it to 15% of the total country energy mix by FY 2030. Due to which the government has allocated the domestic gas to CNG and domestic PNG customers. Cheaper domestic gas has gained the cost advantage of CNG over petrol and diesel for customers.

So what is PNG , CNG and how is it different from LPG ?

PNG – Piped Natural Gas ,and it is used for cooking (gas stoves) and heating water (gas geysers). PNG gas supplied through pipe whereas LPG ( Liquefied Petroleum Gas ) is in liquid form and supplied through cylinders. PNG is much safer option than LPG, since it is cheaper than LPG , much better than LPG in terms of security etc

CNG – Compressed Natural Gas , it is used as a fuel in vehicles as an alternative to petrol and diesel. This gas leaves low carbon emission, and that is the reason it is promoted by various governments and it offers economic benefits also.

In conclusion CNG, LPG, PNG are just different forms of Natural Gas , you can assume them, as the children’s of Natural Gas.

In FY 2019-20 Total Holding SAS , France based global leaders in energy business acquired 37.4% promoter stake in Adani Gas Limited for approx. Rs. 5K crore , which led to change of name from Adani Gas Limited to Adani Total Gas Limited.

Strategic Partnership with Total Group, will give various benefits like access to global LNG at competitive prices , Integration in equipment sourcing and most important access to Total group vast experience.

adani total gas business segment
Source: Company Presentation

Adani Total Gas has 2 major segments , one is PNG gas sales to domestic, industrial and commercial clients and the other one is selling CNG gas via setting up CNG gas station stations.

In FY21 , combined volume of CNG and PNG of 515 MMSCM ( Million Metric Standard Cubic Meters) was achieved vs 582 MMSCM in FY 2020. Company was successful in establishing 102 new CNG stations in FY21 and taking the total to 217 total CNG stations in the country.And the company has projected to build around 1500 CNG stations in the coming 10 years.

As per the management estimates they believe the demand would grow to 97 MMSCMD ( Million Metric Standard Cubic Meters per day ) as of 2 MMSCMD currently from all the licensed 38 geographical areas over the next 8-10 years. To build the infrastructure in these areas to cater to the growing demand would require approx CAPEX of Rs.13,000 CR in the next 5-7 years.

Operating Performance Snapshot

adani total gas operating performance
Source : Company Presentation
adani total gas geographical mix
Source: Company Presentation

Company is aggressively doing CAPEX to build new CNG stations and PNG steels pipe in newers geographical areas via itself and via JV company so as to distribute revenue mix over multiple geographical areas.

Financial Snapshot

atgl financial snapshot
Source : Company Financials

Pee Comparison

adani total gas peer comparison
Source : Company Financials

In the City Gas Distribution (CGD) space, among the listed players, Adani Gas is currently the most valued, but in terms of financials, it is still far behind its peers.

No doubt, Adani Total Gas has the highest potential of volume growth and sound financials, and is worthy of valuation. As of now, Adani Total Gas share prices look completely detached from its fundamentals. As far as our opinion is considered some correction is required it is overheated.

In the Next Article, we take a look at a company raising a lot of eyebrows with its business and stock price :Adani Enterprises.

Part 1 of our series explaining Adani Group Companies. That one covers the business of Adani Ports and SEZ limited. Click on the link to visit there.

Part 2 of our series explaining Adani Group Companies. This one covers the business of Adani Green Energy Limited.

Read all the post in Adani Series here : Adani Group Analysis

This article is for information only, and should not be considered as a recommendation to buy or sell any stocks. Stocks discussed might be part of our holding or recommended to our client.

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