Hold Gujarat State Petronet; target of Rs 327: Prabhudas Lilladher

Prabhudas Lilladher's research report on Gujarat State Petronet

Gujarat State Petronet (GSPL) reported an EBITDA of Rs1.9bn (flat QoQ, PLe: Rs1.9bn, BBGe: Rs1.8bn). PAT came in at Rs1.4bn (down 65.2%QoQ, PLe: Rs1.3bn, BBGe: Rs1.3bn). Decline in PAT was on account of 86% QoQ fall in other income. Total volume declined 2.2% QoQ primarily due to decline in power sector’s consumption and flat demand from fertilizers. Going ahead, we build in 8% CAGR volume growth over FY25-27E with an implied tariff of Rs953/mscm for FY26/27E. The stock is currently trading at 23.1/21.8x FY26/27 EPS.

Outlook

Maintain ‘HOLD’ rating with a TP of Rs323. Investments in Gujarat Gas (54.2% stake) and Sabarmati Gas (27.5% stake) at a 25% holding discount provide a valuation of Rs230, and valuing the core business at 8x FY27E adj EPS at Rs97, we arrive at a TP of Rs327.