Buy Gujarat State Petronet; target of Rs 450: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Gujarat State Petronet

GUJS reported numbers in line with our estimates, with volumes at 37.5mmscmd (improves QoQ - supported by growth in CGDs and the Fertilizer sector). We continue to remain optimistic about volume growth for the company as CGD volumes grow further on the back of festive season demand and economy opening up to its fullest, and higher offtake from the ramp-up/commissioning of fertilizer plants over the next couple of quarters. We expect spot LNG prices to return to normal levels post winter (i.e. end of FY22) as seasonal gas demand subsides, with supply constraints being resolved. RIL has bought ~8mmscmd (4.8mmscmd/3.2mmscmd in auction-II/III) of its own KG basin gas. Various companies (like GSPC, Essar Steel, and GSFC) have procured gas in two rounds of auctions. We believe substantial volume will flow to Gujarat and thus on the pipeline of GUJS.

Outlook

The stock trades at 16x FY23E EPS and 10x FY23E EV/EBITDA. Investments in GUJGA and Sabarmati Gas, at 25% holding discount, offer a valuation of INR307. Valuing the core at 7x (long term trough valuation) adjusted Dec'23E EPS of INR20.5 and adding the value of investments, we arrive at a TP of INR450/share.

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