Target: ₹472
CMP: ₹410.30
After a strong Q1, Q2 will likely be a weak quarter for Gujarat State Petronet Ltd (GSPL) owing to fading power demand, a one-month shutdown at Morbi, and the full-quarter impact of the tariff cut. We build in EBITDA of ₹240 crore and transmission volume of 34mmscmd (down 7 per cent q-o-q). We estimate EBITDA/PAT to decline by 21 per cent/10 per cent q-o-q.
However, we estimate transmission volumes to reach 38.5mmscmd by FY26 (12 per cent CAGR over FY24-26), driven by upcoming LNG terminals in Gujarat and improved demand owing to the focus on reducing the industrial pollution (n (Gujarat has five geographical areas identified as severely/critically polluted).
As part of the company’s merger with Gujarat Gas, the swap ratio for GSPL was fixed at 10:13, i.e., 10 shares of Gujarat Gas (FV ₹2) will be issued for every 13 equity shares of GSPL (FV ₹10). Approval from SEBI and stock exchanges is expected by Dec’24. Approval of shareholders, regulatory authorities and MCA is expected by May’25.
Shares pursuant to the scheme shall be issued within one month of receipt of all the approvals, post which, trading of GSPL shall be suspended. Based on this swap ratio, we revise our TP for GSPL to ₹472/share and downgrade the stock to Neutral
