Buy Gujarat State Petronet; target of Rs 327: Prabhudas Lilladher

Prabhudas Lilladher's research report on Gujarat State Petronet

Gujarat State Petronet (GSPL) reported an EBITDA/PAT of Rs 3.4 bn (+14% Q/Q) and Rs 2.3 bn (+2% Q/Q) respectively. Growth in transmission volumes was primarily seen across CGD and power sector. With decline in gas prices, anticipated increase in LNG capacities and strong demand prospects we remain optimistic on the long term volume growth with an estimated 17.4% CAGR over FY23-FY25. The stock is trading at 14.4x FY25EPS and 9.5x FY25 EV/EBITDA. We estimate a 6.6% CAGR in EPS over FY23-25. The Gujarat government’s new dividend distribution, buyback and bonus share policies bode well for shareholders.

Outlook

We assign a ‘Buy’ rating with a TP of Rs 327. Investments in Gujarat Gas(54.2% stake) and Sabarmati Gas(27.5% stake) at a 25% holding discount provide a valuation of Rs 226, and valuing the core business at 6x FY25EPS at Rs 101, we arrive at our TP of Rs 327.