Company Update: Gujarat State Petronet Ltd (GSPL) - ACCUMULATE - TP Rs.182 - Kotak

We expect domestic gas consumption to rise meaningfully with the fall in international gas prices. Spot LNG prices continues to trade lower in a range of US$5.1 - 5.5/mmbtu due to large liquefaction plants coming up in Australia and US. Further, the long term LNG prices are expected to be lower due to supply glut. Softer LNG prices will continue to attract demand from various sectors, we opine. Additionally, the government is contemplating pan India ban on use of polluting fuels like furnace oil and pet coke used in industrial plants to control pollution. We believe a ban on usage of furnace oil and pet coke will lead to industry fuel demand shifting to natural gas (economical and less polluting). This will be a big positive for city gas distribution companies (more so for GSPL as it serve in industrial belt) as it will result in incremental volume growth from industrial customers.

We expect GSPL to report an EPS of Rs.11.5 and cash EPS of Rs.15 for FY18E and an EPS of Rs.12.3 and cash EPS of Rs.15.9 for FY19E. Higher tariffs and volumes to drive 14% EPS CAGR over FY17-19E. We maintain ACCUMULATE on GSPL with an unchanged DCF based price target of Rs.182/share, given fair valuations at 13.6x PE based on FY19E earnings.

Shares of GUJARAT STATE PETRONET LTD. was last trading in BSE at Rs.169.65 as compared to the previous close of Rs. 166.7. The total number of shares traded during the day was 32924 in over 560 trades.

The stock hit an intraday high of Rs. 171.55 and intraday low of 168. The net turnover during the day was Rs. 5592705.

Source : Equity Bulls

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