Neutral Gujarat State Petronet Ltd For Target Rs.355 by Motilal Oswal Financial Services Ltd
3Q EBITDA in line amid stable volumes and tariff
* Gujarat State Petronet’s (GUJS) 3QFY25 EBITDA was in line with our estimate, as lower-than-estimated volumes were offset by higher-than-estimated tariffs. Volumes continue to remain soft amid weak demand from the fertilizer and power sectors. Implied tariff came in at INR870/mmscm. PAT was dragged by lower other income.
* Following the company’s announcement of the scheme of amalgamation and arrangement in Sep’24, under which GSPC, GUJS, and GEL will amalgamate with GUJGA, the swap ratio for GUJS was fixed at 10:13 (i.e., 10 shares of GUJGA (at an FV of INR2) will be issued for every 13 equity shares of GUJS, at an FV of INR10).
* Based on this swap ratio, we derive our TP of GUJS at INR355/share. We reiterate our Neutral rating on the stock
EBITDA in line; lower other income drags PAT
* GUJS’ 3QFY25 EBITDA was in line with our estimate at INR1.9b (-49% YoY), as:
* The total volumes came 6% below our estimate at 29mmscmd, similar to QoQ.
* Tariff came in 4% above our estimate at INR870/mmscm.
* EBITDA was supported by other expenses, which came in below our estimate.
* While CGD, ref-petchem, and other volumes increased YoY, fertilizer and power volumes declined sharply YoY.
* PAT came in 8% below our estimate at INR1.4b (-48% YoY), as other income came in below our estimate.
Valuation and view
* The available LNG capacity in Gujarat is expected to grow 55% to 42.5mmtpa over the next two years. Most of this volume is likely to flow through GUJS’ network. We believe the company will post a 5.7% CAGR in transmission volumes over FY24-27.
* We expect volumes to jump to ~36mmscmd in FY27, as it is a beneficiary of: a) the upcoming LNG terminals in Gujarat, and b) an improved demand owing to the focus on reducing industrial pollution (Gujarat has five geographical areas identified as severely/critically polluted).
* Based on the announced share swap ratio of 10:13 (GUJS:GUJGA), we arrive at our TP of INR355. We reiterate our Neutral rating on the stock.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
