Motilal Oswal's research report on Gujarat State Petronet
On 20th Apr’24, the Petroleum and Natural Gas Regulatory Board (PNGRB) issued a tariff order (TO) for Gujarat State Petronet (GUJS)’s HP gas network. The tariff was reduced to INR18.1/mmBtu from INR34.0/mmBtu (provisional), which was a major disappointment. Following the TO, we cut our FY25/26E EPS estimates for GUJS by 41% each. We also reduce our TP by 21% to INR355. However, we see limited downside for the stock from the current levels, considering the value of GUJS’ stake in Gujarat Gas (GUJGA) itself is INR270/ share vs. its CMP of INR305/share. GUJS’ CMP implies a holding company discount of 38% vs. our assumption of 25%.
Outlook
Investments in GUJGA and Sabarmati Gas at a 25% holding company discount provide a valuation of INR 273. Valuing the core business at 8x adj. FY26E EPS of INR10.2, and adding the value of investments, we arrive at our TP of INR 355. We reiterate our BUY rating on the stock with a potential upside of 17%.
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