The brokerage firm Motilal Oswal sees a 19% upside in Gujarat Gas with a target price of Rs 475 per equity share. The brokerage believes that there are two big reasons due to which the company’s fundamentals are transforming:
Motilal Oswal on Gujarat Gas: Fall in crude oil prices
The first one is Brent crude oil prices averaging $65 billion a barrel in FY26-27, which was earlier estimated at $70 per barrel. “While Brent crude prices averaged $75.8 per barrel in Q4 FY25, we forecast Brent to average $65 a barrel in FY26/FY27. We estimate every $10 per barrel decline in Brent prices reduces the landed cost of natural gas by $2.3/mmbtu,” said Motilal Oswal.
Motilal Oswal on Gujarat Gas: Globally gas supply expansion
The second reason is a lower pricing slope as LNG global supply expands. A weak crude price outlook together with a lower pricing slope for natural gas (given the impending LNG glut) will drive down gas costs and increase competitiveness against propane. “Further, according to our discussions with the listed and unlisted India CGD companies, new long-term gas contracts are already being signed for a 1.0-1.3% lower slope given the expected surge in LNG supply in H2 FY26 and beyond,” said the brokerage firm.
In the last six months, the share price of Gujarat Gas corrected 34%. The stock price cracked over higher spot LNG prices, which led to increased raw material prices. The second reason behind the weakness in stock prices was due to subdued industrial commercial PNG volumes amid weak ceramic exports and weak competitiveness compared to other fuels like propane.
However, Motilal Oswal believes that valuation de-rating is now almost over.
“We foresee limited downside from the current level amid the scope of margin expansion, robust CNG volume growth, and an expected uptick in Morbi volumes from 1QFY26. Additionally, our margin and volume estimates could see upside risks in case the fundamentals turn in favour of the company,” read the report.
Gujarat Gas stock performance
Gujarat Gas’ share price has fallen 0.8% in the last five trading days. The stock price has given a return of 5.7% in the past one month. The stock has fallen 34% in the last six months. The stock price of Gujarat Gas wiped out 28% in the previous one year.