GSPL share breaks the fall, gains despite UBS 'sell' call

GSPL share price has slumped 17 percent in three months.

The Gujarat State Petronet share traded 3 percent higher early on April 24 in a huge relief for investors after the stock crashed 24 percent over four sessions after the regulator slashed the tariff for its high pressure network, triggering downgrades by a string of brokerages.

The gains came despite analysts at UBS downgrading the stock to “sell” and slashed the price target, saying the tariff cut was a “negative surprise”.

The brokerage's target price is Rs 280, is almost 8 percent lower from the previous session’s close of Rs 303.

At 9.20 am, the stock was trading at Rs 304, up 0.9 percent.

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The recent decision by the Petroleum and Natural Gas Board (PNGRB) to reduce tariffs on GSPL's HP pipeline network has significant implications.

PNGRB slashed the tariff by 47 percent to Rs 34 per metric million British thermal unit (MMBTU), down from the previous Rs 18.1.

The decision contrasts with GSPL's request for a revised tariff of Rs 50.8 per MMBTU. The substantial 47 percent reduction exceeds market expectations, which anticipated a more moderate cut of 10-15 percent.

The PNGRB's decision was based on higher volume assumptions and an extension of the economic life of the pipeline. GSPL's management is reviewing the order.

In a recent interview to CNBC-TV18, PNGRB member AK Tiwari said the adjustment in tariffs was not a cut but a necessary step. The regulator conducted public consultations before issuing the final order.

After the order, UBS revised down GSPL's standalone earnings estimates for FY25 and FY26 by 28 percent and 23 percent, respectively.

Similarly, Nomura cut EBITDA estimates for FY25 and FY26 by 37 percent and 42 percent. It downgraded the stock to “reduce” and lowered the price target to Rs 320 from Rs 440.

The stock has slumped 17 percent in three months.

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