Motilal Oswal's research report on Gujarat State Petronet
Gujarat State Petronet (GUJS)’s 2QFY25 EBITDA was 18% below our estimate at INR1.9b, as total volumes came in 13% lower than our estimate. This marks a slowdown compared to the strong 1Q trend. Implied tariff also came in ~13% below our estimate at INR831/mmscm. PAT was boosted by strong other income (dividend from Gujarat Gas and Sabarmati Gas). Given lower gas demand from the power sector, we have trimmed our volume assumptions and consequently reduced our FY26/27E PAT by 6%/2%. Following Gujarat Gas’s announcement of the scheme of amalgamation and arrangement in Sep’24, under which GSPC, GUJS, and GEL shall amalgamate with GUJGA, the swap ratio for GUJS was fixed at 10:13 (i.e., 10 shares of GUJGA (at an FV of INR2) shall be issued for every 13 equity shares of GUJS (at an FV of INR10)). Based on this swap ratio, we derive our TP of GUJS at INR415/share. We reiterate our Neutral rating on the stock.
Outlook
Based on the announced share swap ratio of 10:13 (GUJS:GUJGA), we arrive at our TP of INR415. We reiterate our Neutral rating on the stock.
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