Neutral Gujarat State Petronet; target of Rs 472: Motilal Oswal

Motilal Oswal's research report on Gujarat State Petronet

After a strong 1Q, 2Q will likely be a weak quarter for GUJS owing to fading power demand, a one-month shutdown at Morbi, and the full-quarter impact of the tariff cut. We build in EBITDA of INR2.4b and transmission volume of 34mmscmd (down 7% QoQ). We estimate EBITDA/PAT to decline by 21%/10% QoQ. However, we estimate transmission volumes to reach 38.5mmscmd by FY26 (12% CAGR over FY24-26), driven by upcoming LNG terminals in Gujarat and improved demand owing to the focus on reducing the industrial pollution.

Outlook

As part of the company’s merger with Gujarat Gas (GUJGA), the swap ratio for GUJS was fixed at 10:13, i.e., 10 shares of GUJGA (FV INR2) will be issued for every 13 equity shares of GUJS (FV INR10). Based on this swap ratio, we revise our TP for GUJS to INR472/share and downgrade the stock to Neutral.