Reduce Gujarat State Petronet: target of Rs 370: Emkay

Emkay's research report on Gujarat State Petronet

We downgrade GSPL to REDUCE from Buy, as the long-awaited HP grid tariff revision came as a major negative surprise. Regulated tariff was set 47% lower from Rs34/mmbtu, at Rs18.1/mmbtu (GCV, wef 1-May), and was a far call from the Rs50.8 sought by GSPL. The effective cut vs FY19 blended book rate is hence ~37% (assuming ~20% LP vol. share) vs our built-in ~20%. PNGRB’s assumptions deviated on future capex, volume divisor & opex vs GSPL’s,

Outlook

while the prospective impact was Rs11/mmbtu vs earlier rate. FY25/26E standalone earnings hence get cut 16%/21% and the DCF-SOTP based TP clipped by Rs45/sh (11%), to Rs370/sh (with rollover to Mar-26). Mgmt said it is studying the ‘order’, though given inordinate delays and the tariff model’s long-term nature, the outlook has turned weak despite tailwinds like lower LNG prices.