GSPL skids 19% after regulator halves HP Transmission tariff

"Authorised tariffs were below our estimates, and much below Street's estimates, which had built in significant optimism, factoring only a moderate cut," said Nomura's Hemang Khanna in a note to clients."We sharply cut FY25-26F EBITDA by 37%/42% and EPS by 34%/40%."

Shares of GSPL closed at ₹305.45 on the NSE on Monday, after a 19.12% decline. Brokerage Nomura in its latest report had reduced the target price for the company to ₹320, from the earlier level of ₹440, and has given a rating of 'reduce' from a 'buy' earlier.

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Analysts expect the company to challenge this price revision and get favourable pricing from the board. "In near term GSPL's earnings will take a hit of ~30% from sharp downward revision of tariffs," said Avishek Datta, research analyst at Anand Rathi Institutional Equities. "I expect the company to challenge this order and any favourable tariff will be an upside risk to earnings."

The brokerage has a 'buy' rating on the stock and Datta says it is better placed than its peers.

"Competitors like have got a favourable tariff order and are better placed but the company is exposed to commodity risk from fluctuations in petchem and LPG prices. We have a hold rating on the stock after a sharp run up," said Datta.

Shares of GSPL have declined 4.6% in 2024 so far, against GAIL which has gained 19.8% in the same period.

"Ironically, such tariff orders will discourage entities from growing volumes, in our view," said Sumit Pokharna, VP - analyst, Kotak Securities. "Stock will remain under pressure till further clarity."