Buy Gujarat State Petronet; target of Rs 342: Sharekhan

Sharekhan is bullish on Gujarat State Petronet has recommended buy rating on the stock with a target price of Rs 342 in its research report dated May 11, 2023.

Broker Research

May 13, 2023 / 23:46 IST

buy

26 Aug, 2025 12:21

Volume

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Sharekhan's research report on Gujarat State Petronet

Q4FY23 operating profit of Rs. 295 crore (up 9.2% q-o-q) was 5% below our estimate due to a lower-than-expected recovery in gas transmission volumes and higher gas transmission charges. PAT of Rs. 224 crore was up 31% q-o-q, beating our estimate by 14% led by significantly higher other income and lower tax rate. Gas transmission volumes recovered by 12% q-o-q to 25 mmscmd (below our estimate of 26 mmscmd) and EBITDA margin also declined by 2.7% q-o-q to Rs. 1.3/scm (2% below estimate). Decline of 9% q-o-q in Net transmission tariff to Rs. 1.5/scm could be attributed to lower ship-or-pay charges. Volume from CGD/refinery & petchem/power grew by 18%/12%/62% q-o-q while that from fertilizer declined by 6% q-o-q. Sharp fall in spot LNG price to $10-11/mmBtu would accelerate volume recovery and PNGRB amendments to natural gas pipeline tariff allays concern over steep tariff cuts of 15-20%. In addition, the Gujarat state government’s recent policies would support shareholders returns as GSPL has already increased dividend payout to 30% and we see a possibility of share buyback (companies with cash of >Rs. 1,000 crore to exercise buyback) given rising cash on books amid high FCF generation (Rs. 777 crore in FY23).

Outlook

We maintain a Buy on GSPL with an unchanged PT of Rs. 342 as core pipeline business is available at only 1.4x FY25E EPS and we expect subsidiary Gujarat Gas volume to also recover given the narrowing down of pricing gap between propane and I-PNG.

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