Buy Gujarat State Petronet; target of Rs 346: Motilal Oswal

Motilal Oswal is bullish on Gujarat State Petronet recommended buy rating on the stock with a target price of Rs 346 in its research report dated May 11, 2023.

Broker Research

May 14, 2023 / 00:31 IST

Buy

Motilal Oswal's research report on Gujarat State Petronet

Gujarat State Petronet (GUJS)’s 4QFY23 EBITDA missed our estimate due to higher-than-estimated other operating expenses. However, PAT was higherthan-estimated led by higher other income of INR476m (v/s INR130m in 3QFY23). Volumes were 6% above estimate at 25.1mmscmd, while implied tariff was 6% below estimate at INR1,562/scm during the quarter. CGD demand has grown with falling LNG prices. Spot LNG price continues to dip to ~USD11/mmBtu for May’23 delivery from USD15.6/mmBtu in 4QFY23 that can result in further volume recovery. The company’s HP gas grid is up for tariff revision and might benefit from the tariff reforms announced last year. The proposed capex for HP gas grid stands at INR45.4b up to FY32E, which would facilitate gas transportation from newer LNG terminals and obviate the need for a tariff cut.

Outlook

The stock is trading at a P/E of 16.1x FY24E EPS of INR17.9 and EV/EBITDA of 10.7x. Return ratios are expected to be at 10-11% during FY24-25. We maintain our BUY rating with a TP of INR346, implying an upside potential of 20%.

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