Buy Gujarat State Petronet; target of Rs 450: Motilal Oswal

Motilal Oswal's research report on Gujarat State Petronet

Gujarat State Petronet (GUJS)’s 3QFY24 EBITDA was in line with our est. at INR3.8b, led by higher realization of INR1,628/mmscm. EBITDAM was 110bp lower than our estimate at 83.3%. Volumes were lower than our estimate at 29mmscmd due to lower offtake by the power sector. The management highlighted that there has been an increase in HP volumes, which led to better realization. LP volumes declined during the quarter. Incremental revenue from the ~3mmscmd Mehsana-Bhatinda pipeline contributed to realization improvement. Spot LNG price is currently at ~USD9.5/mmBtu vs. ~USD15.8/mmBtu in 3QFY24, which bodes well for volumes of the company. The company’s HP gas grid is also up for a tariff revision and might benefit from the tariff reforms announced last year. The proposed capex for the HP gas grid stands at INR45.4b for up to FY32, which would facilitate gas transportation from new LNG terminals and obviate the need for a tariff cut.

Outlook

We have not changed our estimates as of now, as the 3Q performance was largely in line with our estimates. The stock is trading at a P/E of ~20x FY25E EPS of INR19 and EV/EBITDA of ~13x. We maintain our BUY rating with a TP of INR450.