India's Undervalued Gas Distribution Stocks
India's city gas distribution industry has been growing steadily due to increased adoption of CNG vehicles and piped cooking gas connections. The sector is led by Gujarat Gas and Gujarat State Petronet, two companies that are currently trading below the average price-to-earnings ratio of close to 15.2 times. Despite posting positive return on equity, these stocks offer a compelling value proposition for investors.
Gujarat Gas distributes CNG and piped natural gas to households, vehicles, and industrial customers primarily across Gujarat and Maharashtra. The company trades at a price-to-earnings ratio of 13.97, below the sector average of 15.15. Its return on equity is 10.95 percent, supported by a debt-to-equity ratio of 0.18.
Gujarat State Petronet operates natural gas transmission pipelines connecting sources to city gas distributors and industrial consumers across Gujarat. The company's price-to-earnings ratio of 9.57 is the wider discount to the sector average among these two gas distribution stocks, with a return on equity of 8.63 percent. Its debt-to-equity ratio of 0.01 keeps the balance sheet close to debt-free.