Hold Gujarat State Petronet; target of Rs 311: Prabhudas Lilladher

Prabhudas Lilladher's research report on Gujarat State Petronet

Gujarat State Petronet (GSPL) reported a decline in transmission volume QoQ from 29.7mmscmd to 28.5mmscmd during the quarter led by decline in power sector, ref/petrochem and other volumes, partly offset by increase in fertilizer volumes. Implied tariff stood at Rs839.1/mscm compared with Rs863.3/mscm in the previous quarter. Opex per mscm increased from Rs149/mscm to Rs207/mscm QoQ. As a result, EBITDA declined to Rs1.7bn (Ple Rs1.9bn, BBGe Rs2.1bn, -10.2% YoY, -14.4% QoQ). PAT stood at Rs3.8bn (Ple Rs2.2bn, BBGe Rs3.1bn, -1.8% YoY, +168.4% QoQ). Sequential increase in PAT was driven by increase in other income, which stood at Rs3.1bn vs Rs0.4bn in Q1FY26 and Rs2.9bn in Q2FY25.

Outlook

We lower our rating to ‘Hold’ (from ‘Accumulate’) owing to slower-than-anticipated volume pickup. Investments in Gujarat Gas (54.2% stake) and Sabarmati Gas (27.5% stake) at a 25% holding discount provide a valuation of Rs202 and valuing the core business at 10x FY27/FY28E adj EPS at Rs109, we arrive at a TP of Rs311 (earlier: Rs339).

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