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GSPL’s outlook robust as volume growth prospects remain strong

GSPL stands to benefit from rising volumes and expansion at Gujarat Gas of which it is the parent. The entire volume of Gujarat Gas is transported through GSPL's network.Premium
GSPL stands to benefit from rising volumes and expansion at Gujarat Gas of which it is the parent. The entire volume of Gujarat Gas is transported through GSPL's network.

  • The expected monetisation of 365 km pipeline connecting to Ramagundam fertilizer plant can provide additional upside to the GSPL stock, feel analysts. The company’s 52% stake in the pipeline could be valued at Rs360 crore

Shares of Gujarat State Petronet Ltd (GSPL) have seen gains of more than 50% year to date. Strong demand for natural gas has been an advantage for gas pipeline operators such as GSPL. With the impact of lockdowns now largely behind, analysts are positive on volume growth.

GSPL's gas transmission volume is expected to rise at 11% CAGR over FY21-23 to 45 mmscmd (million standard cubic meters of gas per day), as per analysts at HDFC Securities Ltd. This will be led by an increase in supply from domestic sources. The ramping-up of domestic gas production from KG-basin will aid transmission volumes for GSPL.

Rising demand for city gas distribution (CGD) is also likely to drive volume growth. The company also stands to benefit from rising volumes and expansion at Gujarat Gas of which it is the parent. The entire volume of Gujarat Gas is transported through GSPL's network, say analysts at Reliance Securities Ltd, with the former's volumes accounting for nearly a third of GSPL's. As a result, they expect GSPL's volume to witness double-digit growth in the next few years.

Moreover, there has been a surge in demand from refineries and fertilizer companies. Also, rising LNG (liquified natural gas) imports at Mundra terminal and expansion at Dahej terminal bode well for GSPL's volume growth.

The scheduled addition of new terminals at Jafrabad (5MMTPA) in FY23 and Charra (5MMTPA) in FY24 will aid long-term volume growth.

GSPL impressed with gas transmission volumes during the June quarter which at 36.8 mmscmd grew 11% year-on-year and 9% sequentially, and were ahead of HDFC Securities estimates of 35.1 mmscmd.

In addition to this, the expected monetisation of 365 km pipeline connecting to Ramagundam fertilizer plant can provide additional upside to the stock, feel analysts. The company’s 52% stake in the pipeline could be valued at Rs360 crore, said analyst at Reliance Securities, which, they think, can lead to another 3% upside to their target price.

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