Buy Gujarat Industries, Gujarat State Petronet: Emkay

- SLPP unit 1 has already started from April 04, 2015, so 1Q16 likely to be a normalized quarter

- Valuation at 0.6x FY17 is attractive given the 1) low earnings risks, 2) core ROE of 17-18%, 3) reported ROE of 11-12% and 4) growth from wind power

- Maintain Buy rating with a price target of Rs140/share based on 0.9x FY17E book

Gujarat State Petronet (GSPL)Reco: BUYCMP: Rs 118Target Price: Rs 151

Multiple triggers ahead; Maintain Buy

- Result came below our estimates as PAT came at Rs0.7bn (our estimate at Rs1.04bn) declining substantially by 24.4% sequentially on the back of higher depreciation due to change in accounting policy coupled with higher operational expenses

- Transmission tariff stood stable at Rs1.14/scm along with our estimate of Rs1.14/scm improving marginally by 0.6% on sequential basis

- Sequentially, transmission volume declined marginally by 1.4% to 22.6mmscmd (against our estimate of 24mmscmd) mainly on back of shutdown in fertilizer plants & refineries

- We expect multiple triggers for GSP, going ahead i.e. 1) 2-3.5mmscmd incremental volumes from stranded plants 2) upward revision in tariff and 3) expected improvement in transmission volumes from Essar and OPAL. Maintain Buy with target price of Rs151, a 28% upside from current levels. Currently stock trades at 12x FY17 EPS

For all recommendations, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.