Gujarat State Petronet share price plunges from day’s high after big downgrade by brokerages

A big move by the Petroleum and Natural Gas Regulatory Board (PNGRB) has had a tremendously negative impact on the Gujarat State Petronet Ltd (GSPL) share price, which plunged today after having finished in red on Monday too. However, today was a little different as Gujarat State Petronet share price plunged sharply from the day’s high on the back of a number of brokerages revealing that they had downgraded the stock in a big way. The problem stemmed from a big blow to GSPL in the form of a tariffs cut for the company that will pose a massive hurdle and even affect its financial performance, reported MoneyControl. Notably, Kotak Institutional Equities, Nuvama Institutional Equities, Emkay Global and ICICI Securities downgraded the stock in one fell blow.

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The result was that the Gujarat State Petronet share price plunged from its day’s high during the afternoon trade today. In the previous session too it dropped as much as 20 percent. So, what is causing all this negativity?

Notably, the Petroleum and Natural Gas Regulatory Board (PNGRB) has cut tariffs for Gujarat State Petronet's high-pressure (HP) network by a whopping 47 percent.

Downgrades Announced

Kotak has revealed that it has downgraded the stock to "reduce" from "buy" and set a price target of ₹360.

On its part, Nuvama revised its rating in similar fashion and indicated that it is cutting the target price by 30 percent to ₹288.

Emkay has revised its rating to “reduce” and a price target of ₹370.

ICICI Securities revealed that it is marking the stock as a “sell” and lowered the price target by 30 percent to ₹304.

Significantly, the day started on a positive note for GSPL, before it all headed south. The stock rallied in a major way in the morning and jumped 8 percent, reaching a high of ₹327.65. However, that is the point when it started reversing and gave up all the gains.

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GSPL share price was trading at ₹304.25 +0.40 (0.13%) today on the NSE.

Petroleum and Natural Gas Regulatory Board cuts tariffs

The board approved tariffs of ₹18.1/mmbtu for GSPL's HP pipeline starting May 1, and that is lower by 47 percent than the existing tariff ( ₹34/mmbtu). In fact, the tariffs sought by the company was ₹51-54/mmbtu.

Kotak revealed that at this rate, the company’s FY25-26 earnings estimates stand reduced by 28 to 37 percent. It also indicated that the RoCE may drop to 11-12 percent against around 24 percent on average over the earlier FY19-23 period.

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Nuvama said that this tariff cut could result in a 42 percent and a 40 percent reduction in EBITDA estimates for FY25 and FY26 although it did add the proviso that it sees a rapid growth for the company on clear volume visibility.

For Emkay, GSPL outlook has turned weak and this is so despite some favourable tailwinds.

ICICI Securities was quoted by MoneyControl as saying, "If we apply this revised tariff to FY25-26E, it suggests a substantial 44-45 percent decrease in FY25/26 earnings-per-stock compared to previous estimates.”

However, brokerage Prabhudas Lilladher has gone clearly against the consensus and revealed that it has upgraded the GSPL to “buy” from “accumulate” with a target price of ₹392. The reason? It said the tariff has left no scope for more negatives.