Gujarat Energy Ltd (GUJENERGY) Q2 FY27 Earnings Call: Signs 0.8 MTPA Long-Term LNG Contracts, Maintains 5-6% Trading Margin Guidance

Gujarat Energy Ltd held its Q2 FY27 earnings call on November 05, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Top Line, Softer EBITDA Conversion

• Revenue up 59% YoY to Rs.9,826 crore in Q2 FY 2026-2027; EBITDA up 20% to Rs.1,019 crore and PAT up 22% to Rs.639 crore — EBITDA growth lagging revenue growth signals margin compression in the quarter.
• H1 FY 2026-2027 momentum stronger — revenue up 61% YoY to Rs.19,496 crore, EBITDA up 43% to Rs.2,502 crore, PAT up 51% to Rs.1,637 crore.
• Gas trading drove the top line — Q2 FY 2026-2027 trading revenue of Rs.7,615 crore (+84% YoY) and EBITDA of Rs.329 crore (+89% YoY); H1 FY 2026-2027 trading revenue at Rs.14,749 crore.
• Capex of Rs.181 crore in Q2 took H1 FY 2026-2027 capex to Rs.308 crore; management reiterated FY 2026-2027 capex guidance of approximately Rs.1,000 crore, focused largely on CGD infrastructure.
• Working capital spiked — standalone inventories rose to Rs.2,500 crore (from Rs.990 crore), trade receivables to Rs.2,420 crore and trade payables to Rs.3,561 crore; management attributed this to 5 cargoes arriving in the last week of September.
• Rs.184 crore gap between the sum of segment EBITDAs and reported EBITDA (which includes other income) in Q2 FY 2026-2027; management said the new investor presentation removes "other" EBITDA not attributable to any segment.

Building a Propane-Competitive Long-Term Book

• 0.8 MTPA of new contracts signed — board approved long-term LNG sourcing agreements, Henry Hub-linked, tenure up to 10 years, at an estimated $7–9/MMBTU on a DES basis (delivered into India, seller bears freight and insurance), underpinned by a Henry Hub assumption of $3–3.5 (period unspecified).
• Existing book of ~3 MTPA across five contracts — Shell 1 MTPA (expires 2038, price review clause), new Qatar 1 MTPA (started 2026, runs to 2042), legacy Qatar 0.3 MTPA (expires 2028), Total and Uniper at 0.4 MTPA each (10-year contracts; Total started 2026, Uniper starts January 2028).
• Target of ~4 MTPA total book (period unspecified) — management is targeting two more contracts as existing ones expire; the newly signed 0.8 MTPA is intended to be reserved for Morbi customers rather than sold back-to-back.
• 60-70% long-term coverage aspiration — for the FY 2028-2029 portfolio structure, management would like at least 60-70% of total sales covered through long-term contracts, with a probable 40-60% split between Brent-linked and Henry Hub-linked volumes (subsequently clarifying 60%); spot purchases will remain part of the portfolio.
• Four Brent-linked contracts already in the portfolio as of Q2 FY 2026-2027 — one with Shell, two with Qatar Energy, one with Uniper — all available from 2028 onwards.
• Spot LNG at close to 50% of sourcing in Q2 FY 2026-2027; management stated its effort is to diversify sourcing locations, potentially other than the Middle East — aspirational, with no specific volume or timeline given.
• Propane hedging remains difficult — propane is generally priced at Saudi CP, which Saudi Aramco announces only one month before supply begins, with "no mathematical logic or reasoning" behind the announced price; management noted an oil linkage of close to 11%-12% is generally good enough to compete with propane (period unspecified).

Q2 Miss vs Guidance; Qatar Disruption the Culprit

• Q2 FY 2026-2027 trading margin of ~3-3.5% excluding other income, versus earlier guidance of 5-6% (period unspecified) — flagged by Binit Banca (Nomura), who noted peer GAIL reported very strong trading margins in the same quarter.
• Management defended the full-year view — per half-yearly guidance it is around 7% for H1 FY 2026-2027 (Q1 higher, Q2 at ~4%) and said it is "not going back" on the margin expectation for the gas trading business.
• Qatar supply disruption — MD Avantika Singh attributed Q2 margin volatility to disruption of long-term contract volumes from Qatar due to post-measure conditions; shortfall volumes must be replaced via spot purchases, and margins are protected only to the extent costs are passed on to end consumers.
• 5-6% FY 2026-2027 trading margin guidance maintained despite the analyst noting the business historically ran 6-7% margins over the last 5-6 years (FY23 an outlier) and calling the guidance conservative; management cited geopolitical uncertainties.
• No negative margin in fertilizer offtake in Q2 FY 2026-2027 despite spot-minus-Brent being negative — management noted it earned around Rs.300 crore in the process; gas trading carries no depreciation as no assets are used for trading.

Volume Growth Intact, Morbi Still Depressed

• CGD guidance cut — FY 2026-2027 CGD EBITDA per SCM guidance revised down to ~5-6, from 5.5-6.5 guided at the Q1 FY 2026-2027 call; the Rs.5-6 per SCM margin guidance excludes other income (guidance period unspecified). Q2 FY 2026-2027 realized CGD margin came in at Rs.4.7 per SCM.
• CGD realization dipped marginally QoQ from 465 to 463 in Q2 FY 2026-2027; management characterized this as not a major dip in CGD EBITDA margins, noting industrial sourcing costs also rose and volumes came down during the period.
• Morbi trajectory deteriorated — from ~2.5 pre-crisis (February), peaking at 8-8.5 during the crisis, ~3 on the previous call, to ~1 currently (Q2 FY 2026-2027); management attributed the decline to multiple issues including substantially higher freight costs. Q2 Morbi volume stood at 3.8 per MD Avantika Singh's clarification for modeling.
• Industrial PNG grew 39% YoY to 6.1 MMSCMD in Q2 FY 2026-2027 despite Morbi normalizing from ~8 MMSCMD in Q1 to ~3 MMSCMD; efficient sourcing ensured margin growth offset the volume impact. Diversification push into Rajkot, Surendranagar, Surat, Bharuch, Ankleshwar, Valsad and Dadra & Nagar Haveli.
• CNG volumes up 11% YoY to 3.67 MMSCMD in Q2 FY 2026-2027 (Gujarat +12%, outside Gujarat +19%); sequential dip attributed to monsoon seasonality; 18 stations added in H1 to reach 857, targeting 75+ new CNG stations in FY 2026-2027.
• CNG price cut deferred — MD Avantika Singh said the company will take a call "at the appropriate time," declining to commit now, noting both oil and gas prices are presently elevated; analyst premise was that OMC petrol/diesel price reversals could pressure CNG differential viability.
• Customer base of ~25.3 lakh domestic PNG connections, plus 17,000 commercial and 4,500 industrial connections; management sees meaningful headroom to deepen penetration in established and newer GAs.

Consolidation Drag and the GSFS Question

• Rs.149 crore gap between standalone and consolidated PAT in Q2 FY 2026-2027 — flagged by Deepak Malhotra (Cap Growth Capital Advisors LLP), attributed to losses in the power and gasification businesses, apart from dividend and interest income.
• Power plants running on energy shortage — management is talking to utility entities on reducing losses and will come up with a concrete plan to turn around the two companies going forward; GCC LNG has achieved 24-25% capacity utilization and turned cash-profitable as of Q2 FY 2026-2027.
• No parent guarantees on GSPC LNG debt — management (Rajesh) confirmed GEL has not given any guarantees on subsidiary debt and would not be liable for the Rs.3,000 crore debt at GSPC LNG in case of default.
• GSFS linkage denied — management explicitly called the presumed linkage between GEL's deposits with GSFS and GSFS's ~Rs.3,100-3,200 crore loan to GSPC LNG a "myth"; GSPC LNG's earlier bank loans were refinanced by GSFS before it became a GEL subsidiary, and no requirement exists to park a minimum treasury with GSFS.
• Cash of ~Rs.7,000-7,500 crore as of Q2 FY 2026-2027 managed under a board-approved investment policy allocating to the highest interest rates across banks; deposits with GSFS stand at close to Rs.3,300 crore, down from exclusive pre-merger parking.
• Tax refunds of close to Rs.900 crore expected before the end of FY 2026-2027 per Rajesh (Management); returns for FY 2026-2027 have also been filed.

Cash Deployment, CBG and the 2028 Propane Window

• Investment plans by Q3 FY 2026-2027 call — with net cash of Rs.7,000 crore versus a Rs.1,000 crore FY 2026-2027 capex lineup and EBITDA/operating cash flow generation of more than Rs.3,000 crore (period unspecified), management reaffirmed guidance to come out with certain investment plans by the Q3 FY 2026-2027 earnings call; consultants appointed to review the go-forward growth strategy.
• CBG entry initiated — seeking partners to set up compressed biogas plants to support CBG blending requirements and, in the long run, reduce dependence on imported LNG; CBG capex capped at close to Rs.100 crore maximum in FY 2026-2027.
• Propane confidence for 2028 — management stated it is confident of achieving good volumes in propane from 2028 despite short-term issues, with import/storage infrastructure still under evaluation (a couple of locations under consideration); it still feels that starting FY 2027-2028 it will be in a position to supply LNG at a competitive price against propane.
• Mundra terminal capacity booked — firm capacity at the Mundra LNG terminal booked alongside the 0.8 MTPA contracts; H1 FY 2026-2027 saw 24 LNG cargoes imported vs 14 in H1 FY 2025-2026; LNG terminal utilization at close to 24% in Q2 FY 2026-2027.
• Exploring 6 LNG stations in its GAs for long-haul transportation (period unspecified); won PNGRB's Special Jury Award for Top Target Achiever GA (Narmada District GA) and Best Performing GA during PNG Drive 2.0 (Bhatinda District GA), plus the Golden Peacock Award for Risk Management 2026 from the Institute of Directors.
• Next call in early February 2027 — Q3 FY 2026-2027 results call scheduled for the first week of February 2027; several data points (Shell vs spot split, Q1/Q2 FY26 volume breakdowns) were deferred to follow-ups or the investor presentation.