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MOSL: GUJARAT STATE PETRONET (Buy)-Volumes strong, to be even stronger from here on

GUJARAT STATE PETRONET: Volumes strong, to be even stronger from here on

(GUJS IN, Mkt Cap USD2.5b, CMP INR325, TP INR450, 39% Upside, Buy)

 

• GUJS reported numbers in line with our estimates, with volumes at 37.5mmscmd (improves QoQ - supported by growth in CGDs and the Fertilizer sector).
• We continue to remain optimistic about volume growth for the company as CGD volumes grow further on the back of festive season demand and economy opening up to its fullest, and higher offtake from the ramp-up/commissioning of fertilizer plants over the next couple of quarters.
• We expect spot LNG prices to return to normal levels post winter (i.e. end of FY22) as seasonal gas demand subsides, with supply constraints being resolved.
• RIL has bought ~8mmscmd (4.8mmscmd/3.2mmscmd in auction-II/III) of its own KG basin gas. Various companies (like GSPC, Essar Steel, and GSFC) have procured gas in two rounds of auctions. We believe substantial volume will flow to Gujarat and thus on the pipeline of GUJS.
• Mehsana-Bhatinda pipeline is guided to be completed by the end of FY22. Around 4mmscmd of gas is currently flowing through Phase-I of Mehsana-Bhatinda pipeline and has already become cash flow profitable. Phase II commissioning is expected by FY22-end, post which total volumes should reach 9.5-10mmscmd. IOCL's Panipat and Bhatinda refinery would start consuming ~2.5mmscmd of gas each.