Gujarat State Petronet Ltd. share price target

Gujarat State Petronet (GSPL) reported a 49%/48% YoY decline in EBITDA/PAT to INR 1.9/INR 1.36bn with EBITDA/PAT below our estimate of INR 2.1bn /INR 1.4bn.

Q2 EBITDA declined 54% YoY primarily on sharp tariff cut from May'24; GIGL called on GUJS for cash deficit support under sponsor agreement

Gujarat State Petronet (GUJS)’s 2QFY25 EBITDA was 18% below our estimate at INR1.9b, as total volumes came in 13% lower than our estimate.

After a strong 1Q, 2Q will likely be a weak quarter for GUJS owing to fading power demand, a one-month shutdown at Morbi, and the full-quarter impact of the tariff cut.

GSPL stock's driver to be value of GUJGA and GTL post transaction with a specified swap ratio of 10+3.33 to 13 shares

Q1 EBITDA was in line with consensus. Factoring in beat to our Q1 estimate and gas consumption pick up, we raise our FY25-26 estimates

Gujarat State Petronet’s (GUJS) 4QFY24 EBITDA was in line with our est.
at INR3.8b, led by higher transmission volume of 33.4mmscmd. EBITDAM
was 50bp higher than our estimate at 83.1%. Realization was lower than
our estimate at INR1,495/mmscm.

Sharp tariff cut due to recognition of higher volumes, adjustment of past excess revenue and extension of pipeline's economic life

We downgrade GSPL to REDUCE from Buy, as the long-awaited HP grid tariff revision came as a major negative surprise. The regulated tariff was set 47% lower from Rs34/mmbtu, at Rs18.1/mmbtu (GCV, wef 1-May), and was a far call from the Rs50.8 sought by GSPL.

On 20th Apr’24, the Petroleum and Natural Gas Regulatory Board (PNGRB)
issued a tariff order (TO) for Gujarat State Petronet (GUJS)’s HP gas
network. The tariff was reduced to INR18.1/mmBtu from INR34.0/mmBtu
(provisional), which was a major disappointment.

We downgrade GSPL to REDUCE from Buy, as the long-awaited HP grid tariff
revision came as a major negative surprise. Regulated tariff was set 47% lower
from Rs34/mmbtu, at Rs18.1/mmbtu (GCV, wef 1-May), and was a far call from
the Rs50.8 sought by GSPL.

Gujarat State Petronet’s (GSPL) Q1FY24 revenue was flat QoQ while declining YoY, even as volumes recovered 17% QoQ (flat YoY). New tariff from 1st Apr’23 led to the miss, with 11% / 13% YoY / QoQ decline in blended tariffs for Q1. Transmission volumes of 29.4mmscmd reached a 5-quarter high and we believe the trajectory will likely keep growing.

Standalone business trading at FY24E P/B of 0.4x after adjusting for GUJGA stake at market value minus 30% holding discount