Gujarat State Petronet: ICICI Securities bullish on this oil & gas stock despite weak demand; sees over 60% upside

Gujarat State Petronet share price target: Even though gas demand remains poor across Gujarat, brokerage firm ICICI Securities is bullish on Gujarat State Petronet stock in the long-run. The bullishness is largely due to a high probability of negligible tariff decline and expansion plans.  It says post the forward movement being seen on the regulatory front, GSPL has 5 projects lined up.  

Quoting the management, ICICI Securities said GSPL has aggressive plans to invest more than Rs20bn in various pipeline expansions and utilisation of even 30% of the expansions can net 20- 21mmscmd of transmission volumes by end of FY25E (vs the current base of 28- 32mmscmd). 

It maintained a buy call on Gujarat State Petronet for a target price of Rs 375 per share, an upside of 62.5% on Tuesday's closing price.  

With a high probability of negligible tariff decline even post the revision order expected in the next few months, GSPL’s standalone business value itself can see an appreciation of Rs40/sh as per our rough-cut estimates, it said.  

"While consolidated earnings may remain muted due to weak demand for both GSPL transmission volumes as well weaker prospects for subsidiary GGL at least in FY23E, valuations at <9x FY24E EPS and just 3.2xEV/EBITDA remain extremely skewed towards reward from a risk-reward perspective. We revise our FY23E and FY24E EPS by -11/-5% while longer-term volume and tariff adjustments drive a 10% increase in the target price to Rs375/sh. Reiterate BUY," the brokerage added.  

Gujarat State Petronet share price gained 3.9% or by Rs 8.65 to close at Rs 230.65 apiece on the BSE on Tuesday. One of the largest gas trading companies in India, Gujarat State Petronet company's stock has yielded a negative return of 28% in the past one year and has declined over seven per cent in the past one week. The gas stock traded on 52-week high of Rs 336.30 per share on the BSE on October 19, last year, while it touched one-year low of Rs 209.45 on June 24 this year.