Gujarat Energy Ltd shares fell in early trade on Wednesday after Morgan Staley downgraded the company's rating to Underweight from Overweight, also sharply cutting its target price to Rs 246 from Rs 523.
Shares of Gujarat Energy fell as much as 1.23% to Rs 253.25 apiece, after opening in the green.
The brokerage said the integration expands Gujarat Gas' scale and earnings base, but flagged several concerns. Higher exposure to spot LNG, increasing competition from alternative fuels and low utilisation of downstream gas assets could weigh on the outlook.
Morgan Stanley expects global LNG markets to remain tight in H2CY26, keeping gas costs elevated. This is a concern for Gujarat Gas' core retail gas business, which remains exposed to costlier LNG even as alternative fuels become increasingly competitive.
The brokerage also noted that downstream assets remain underutilised, limiting the benefits from the expanded scale.
Given these pressures, Morgan Stanley prefers refiners over Gujarat Gas, arguing that the current risk-reward remains unattractive despite the stock's low valuation.
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