Government officially notifies higher gas price from April 2014 - Angel Broking

The government has officially notified the new gas pricing policy that would be applicable to all the domestically produced gas from April 2014 which will be effective for five years. As per the new pricing mechanism, the new gas price is likely to be US$8.4/mmbtu for FY2015. Currently, the gas prices are in the range of US$4.2-5.7/mmbtu for domestically produced gas. Amongst our coverage companies, Reliance Industries (RIL) and ONGC are likely to be main beneficiaries of higher gas prices. However, we had factored the new prices in our FY2015 estimates earlier when the government had announced the gas price hike. RIL will have to submit bank guarantee before it can sell gas at a higher price which is not likely to be a constraint for the company.

We maintain our Accumulate rating on ONGC with a target price of Rs. 318 and Buy rating on RIL with a target price of Rs. 1020.

Source : Equity Bulls

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