Sharekhan Places Buy On Midcap Oil & Gas Sector Stock, Target Price Rs 342

Leading broking firm Sharekhan has a Buy on Gujarat State Petronet Ltd. (GSPL) with a Target price of Rs. 342 apiece. The stock is showing 16% upside potential with the given target price if purchased at the current market price. GSPL is Oil & Gas Sector midcap stock. It has a market valuation of Rs. 16,714.76 crore.

According to the brokerage, GSPL's earnings outlook has improved considerably, given the steep decline in spot LNG price and cap on APM gas price. Thus, we expect strong volume recovery over FY2024-FY2025 from CGD/refinery and petchem sectors, which could take GSPL's volume to ~32 mmscmd (implies 25% y-o-y growth) in FY2024.

Improved earnings outlook; core pipeline business attractively valued

Accroding to the Sharekhan, The recent sharp decline in spot LNG price to ~$11-12/mmbtu and cap on APM gas price at $6.5/mmbtu have considerably improved volume recovery outlook for Gujarat State Petronet Limited (GSPL) and the same is visible in strong 18%/12% q-o-q increase in gas transmission volume from CGDs/refinery and petchem sectors.

The brokerage said, "We believe normalised CGD/refinery and petchem volume would take GSPL's FY2024 volume to ~32 mmscmd, which implies significant growth of 25% y-o-y. Long-term volume growth would be supported by the new LNG terminals. Amendments in the gas pipeline tariff would help accelerate the capex plan (>Rs. 3,000 crore over the next 4-5 years), which bode well for the gas pipeline tariff."

It added, "We expect GSPL's PAT to report a 13% CAGR over FY2023-FY2025E. We highlight here that FY2023 had the advantage of material benefit from take-or-pay charges in gas pipeline tariff. We maintain our Buy rating on GSPL with an unchanged price target (PT) of Rs. 342."

Key Risks

According to Sharekhan, the key risks are, "Lower-than-expected gas demand from power, fertilisers, refineries, and CGD due to a spike in LNG prices could affect gas transmission volumes. Any adverse regulatory changes in terms of gas transmission tariffs. Delay in volume ramp-up at new LNG terminals."

Stock Movement

The shares of Gujarat State Petronet Ltd. last traded at Rs. 296.25 apiece on NSE, down 0.13% from its previous close. The stock has fallen 1.82% in the past 1 week.

It jumped 2.26% in 1 month, 7.9% in 1 month and 16.61% in 6 months, respectively. It has given 39.81% positive return in 1 year. In 3 years it gave 36.8% positive return, while in the past 5 years, it gave 62.86% positive return.

Disclaimer - The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.