HDFC Securities is bullish on Gujarat State Petronet has recommended buy rating on the stock with a target price of Rs 247 in its research report dated August 05, 2019.
HDFC Securities' research report on Gujarat State Petronet
Gas transmission volume for the quarter was 38.2mmscmd (+17.9% QoQ and +4.6% YoY) as against our estimate of 36.5mmscmd. Volume break-up in mmscmd was: Refinery 13.4, Fertiliser 3.8, Power 5, CGD 10.7 and other 5.3. Blended transmission tariff was Rs 1,434/tscm (-2.1% QoQ and -2.3% YoY), which was in-line with our estimate. Post NGT order to ban use of coal gasifiers in Morbi area in order to curb pollution, CGD demand jumped up by 26.8% QoQ to 10.7mmscmd. Besides, demand from power and other industries increased by 24% QoQ owing to low spot LNG prices. The volume outlook of GSPL shall remain robust owing to (1) Strong demand from CGD, power and other industries, (2) The sole right to transmit re-gasified gas from Gujarat State Petroleum Corporation (GSPC) -Adani’s 5mmtpa LNG Mundra terminal, (3) Post expansion of Petronet LNG’s Dahej terminal to 17.5mmtpa from 15mmtpa.
We maintain BUY on GSPL post a better than estimated performance in 1QFY20. We expect benign spot LNG prices (1) To drive strong volume growth from industrial customers and (2) Encourage RIL to continue to using LNG. We raise our volume estimates for FY20/21 by 11.4/13%, thus our SOTP based TP to Rs 247/share.
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