Gujarat State Petronet - Sharp Cut In HP Gas Grid Tariff: Prabhudas Lilladher

Prabhudas Lilladher Report

Petroleum and Natural Gas Regulatory Board , in its tariff order, revised Gujarat State Petronet Ltd.’s HP Gas Grid tariff to Rs18.1/million metric British thermal unit wef from May 01, 2024, a sharp cut of 46.7% against the existing tariff of Rs 34/mmBtu.

GSPL had proposed the tariff to be revised to Rs50.77/mmBtu. Out of the current volume of 29 million metric standard cubic metre per day, ~24-25 mmscmd would be through HP Gas Grid and we believe this would result in ~30% cut in earnings per share forecasts for FY25/26E.

Going ahead, we estimate transmission volume of 35 mmscmd for FY25/26E with a tariff of Rs 1,088/mscm.

We upgrade our rating from ‘Accumulate’ to ‘Buy’ as no further negatives are expected in the stock, with a target price of Rs 392 based on 10 times FY26 adjusted earnings per share of ~Rs 12 and adding the value of its stake in Gujarat Gas Ltd. and Sabarmati Gas at 25% holding company discount.

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