Synopsis:
Gujarat State Petronet is in focus as Morgan Stanley has cut its target price by 35 percent to Rs 295 from Rs 452 earlier. Additionally, it also added that it favours GAIL and Petronet LNG as it better plays on India’s gas adoption theme, given GSPL’s limited growth capex and pipeline capacity expansion.
The shares of this leading natural gas transmission company are in focus as a global brokerage slashes its target price massively. In this article, we will dive more into the details behind this.
With a market capitalisation of Rs 17,378 crore, the shares of Gujarat State Petronet Ltd made a day low of Rs 303.15 per share, down by 2 percent from its previous day closing price of Rs 309.85 per share. Over the past five years, the stock has delivered a positive return of 56 percent.
Analyst Comments
Leading global brokerage house, Morgan Stanley, has reduced the rating of Gujarat State Petronet (GSPL) from Overweight to Equalweight and cut its target price by a considerable 35 percent from Rs 452 to Rs 295, signalling a downside of 3 percent from its current market price of Rs 303.15.
The firm says that GAIL and Petronet LNG are better picks for the gas adoption in India, as GSPL faces a cap on its growth capex and pipeline expansion. It is estimated that GSPL’s transmission volumes will grow at a slow 4 percent CAGR during FY25–FY28, which is less than half the industry average. It also added that the upcoming restructuring from the GSPC group will grab investor attention in the future.
The main factors that could lead to a more optimistic scenario are higher LNG volume growth than anticipated, an increase in regulated transmission tariffs, and a quicker start of Chhara and Jafrabad FSRU terminals.
Consequently, the risk events are the delays of these terminal operations and the volume decrease that can occur if Reliance Industries’ petcoke gasification plant is intensified.
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Financial Highlights
GSPL’s revenue for Q1 FY26 came in at Rs 4,107 crore, down by 13 percent from Rs 4,727 crore in the same quarter last year. Additionally, on a sequential basis, revenue declined by 4 percent from Rs 4,291 crore in Q4 FY25.
Coming to its profitability, the company reported a net profit decline of 12 percent to Rs 465 crore in Q1 FY26 as compared to Rs 527 crore in Q1 FY25. However, on a QoQ basis, it recorded a growth of 32 percent from Rs 352 crore.
The company has delivered an ROE and ROCE of 9.89 percent and 15.16 percent respectively, and is currently trading at a P/E of 16.47x as compared to its industry average of 14.37x
Gujarat State Petronet Limited (GSPL) is one of the companies responsible for building and operating the energy transport infrastructure using natural gas pipelines in India. It links supply sources and LNG terminals with demand centers, thus catering to the needs of various industrial sectors like refineries, steel, fertilizers, petrochemicals, power, chemicals, textiles, and city gas distributors. Besides, the company is engaged in gas trading and power generation through wind energy as well.
Written by Satyajeet Mukherjee
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