Buy Gujarat State Petronet; target of Rs 342: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on Gujarat State Petronet

Recently the PNGRB has announced several amendments in natural gas pipeline tariff. Key amendments include – Relaxed volume ramp-up period to 10 years, allowance of transmission loss at 0.1%, tax rate of 25% for tariff applicable from FY24 and non-retrospective and exclusion of pipeline capacity addition for tariff calculations due to addition of new gas source. Amendments on prospective applicability of a tax rate of 25% for tariff calculation and allowance of transmission loss at 0.1% would allay concern over steep tariff cuts of 15-20% to large extent, while volume ramp-up and exclusion of new gas source bodes well for revival in gas pipeline capex cycle (GSPL has planned capex of ~Rs. 2000 crore to connect pipelines to LNG terminals in Gujarat). Core pipeline business is effectively available free to investors as market value of GSPL’s investment in Gujarat Gas (after assuming 20% holding company discount) is close to GSPL’s current market capitalisation of Rs. 15,070 crore).

Outlook

We maintain a Buy on GSPL with a revised PT of Rs342 as assign higher valuation multiple to core pipeline business given PNGRB amendments removes tariff overhang and higher value for stake in Gujarat Gas (at 40% holding company discount to our PT of Rs. 560).

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Gujarat State Petronet - 07 -12-2022 - khan