Should investors buy Gujarat Gas after 15% rally?

MUMBAI: Shares of Gujarat Gas Company (GGCL) surged nearly 15 per cent intraday as the company got an authorisation from Petroleum and Natural Gas Regulatory Board (PNGRB) to lay, build, operate, or expand city or local natural gas distribution network (CGD) for the geographical area of Thane, Maharashtra.

The stock ended at Rs 742.80, up over 11 percent.

According to analysts, those who own GGCL should hold on to it and other long term investors should buy it on declines.

“Today is likely to be the trend day for GGCL as the stock may close at the highs of the day. Overall, the stoploss should be at Rs 580-600; that is a fairly wide stop,” said Ashwani Gujral, Fund Manager, ashwanigujral.com.

“It’s a buy on declines and the target is closer to Rs 1100. Whenever it has 2-3 days of decline, get into the stock. The downside is closer to Rs 650. So with that of downside in mind, long term investors should get in at any sort of decline,” Gujral added.

GGCL has been granted 300 months of infrastructure exclusivity i.e. valid up to April 01, 2040 and 60 months of marketng exclusivity valid up to April 01, 2020 for the CGD network.

“Further, the Authorised area for laying, building, operating or expanding the proposed CGD Network shall cover a geographical area of 8,683 sq. km,” the company said in a filing to stock exchanges.

According to an analyst tracking the sector, the company will supply gas to nearly 10 lakh households with an approximate investment of Rs 1,207 crore. The gas will be used for small and medium industrial units as well.