Reduce GSPL - Geojit BNP Paribas

Reduce GSPL – TP Rs.68

- GSPL has been downgraded to 'reduce' with a target price of Rs.68 over one year.

- It is expected that the transmission volume to drop to 31 mmscmd by FY14 from the peak of 36.8 mmscmd achieved in 1QFY12.

- Decline in volume is expected because the offtake by the power should weaken further on the back of a continuous decline in KG –D6 output. Upside from refining and city gas would be insufficient to offset this decline.

- The share price may also be affected on regulatory issues. Petroleum and Natural Gas Regulatory Board (PNGRB) is expected to look in to Gujarat network capacity and tariff by end 2012 and this overhang may remain on the stock price until clarity is emerged on this issue.

- The stock is downgraded to reduce despite it is traded at low multiples. The earnings are expected to be impacted by the potential tariff cut.

Source : Equity Bulls

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