Broker’s call: GSPL (Buy)
Target: $360
CMP: INR 296.10
Gujarat Petronet GSPL is well positioned to see volume recover, led by LNG prices that have fallen below USD15/mmbtu, while the long-awaited tariff revision of the HP network should lead to a better earnings view.
The management has headed towards an increasing capital trend, with a capex target for FY24 of Rs.700 crore (against Rs.100-200 crore per annum in the last five years). PNGRB’s decision is expected soon.
We estimate that the revised tariff is better than expected, on the back of renewed capital focus and taking cues from the recent low pressure (LP) network tariff arrangement.
We repeat purchase on GSPL; We hold our estimate and take profit of $360 per share unchanged, but there are upside risks based on the tariff event. While we maintain a neutral and cautious view on Gujarat gas, the recent increase in propane import duties will give protection from further downsides.
GSPL’s impending tariff revision is key to seeing earnings over the medium term, as the stock continues to trade at attractive valuations. Key risks: reverse oil and gas prices/demand, industrial slowdowns, cost overruns, project delays and regulatory overreach.