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Systematix Research Report
Petroleum and Natural Gas Regulatory Board came out with a new tariff order for the Gujarat State Petronet Ltd.’s high-pressure pipeline which has seen a massive cut of 46.8% from the current tariff to Rs 18.1/metric million British thermal unit (Gujarat State Petronet’s expectation of Rs 50.8/mmbtu).
New tariff has seen a two-year delay and would be effective from May 01, 2024. 47% tariff cut was significantly below our earlier expectation of ~15%-20% cut which was largely attributed to higher future volume assumptions. However, due to significant delay in new tariff order we were modeling flattish tariff earlier.
Therefore, led by new tariff order we cut our Ebitda estimates by 43%/47% from our earlier assumption and now forecast average tariff of Rs 29.5/28 per mmbtu for FY25E/FY26E.
We continue to forecast a volume of 31/32.6 million metric standard cubic metre per day for FY25E/FY26E rising from 29.5 mmscmd in FY24E.
We, therefore, cut our target price to Rs 309/share from earlier Rs 350/share (Rs 181 for it’s 54.2% stake in Gujarat Gas at 50% holding discount at current price, Rs 105/share at eight times to FY26E core earnings and Rs 24 to its value in GIGL, GITL and Sabarmati Gas).
We downgrade the stock to Sell from earlier Hold. However, the company may challenge the order which could further delay the actual tariff cut.
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Also Read: Hindustan Zinc Q4 Results Review - Inline; Cost Of Production To Remain Under Control: Motilal Oswal
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