Gujarat Gas jumps 8% after Nomura upgrade; target Rs 390

Stock reaction: Gujarat Gas leads BSE Midcap

Gujarat Gas Ltd shares jumped nearly 7% to 8% on Friday after international brokerage Nomura double-upgraded the stock from ‘Reduce’ to ‘Buy’. In afternoon trade, the stock was quoted at Rs 362.05, up 7.9%, and was the top gainer on the BSE Midcap index. Nomura maintained its DCF-based target price of Rs 390 per share. The target implies an upside of over 16% from the previous closing price, as cited in the report. The move came after a period of underperformance, with the stock down nearly 17% in 2026 so far and more than 21% over the past year.

Why Nomura upgraded: multiple tailwinds after the correction

Nomura said the upgrade reflects a combination of tailwinds linked to the US-Iran conflict and what it called attractive valuations after a recent correction. The brokerage linked the current supply stress to disruptions in the Strait of Hormuz, a key global trade route, which has contributed to a gas supply crunch. Against this backdrop, the firm argued the situation improves demand visibility in Gujarat Gas’ industrial-facing pockets. Nomura also pointed to potential improvement in pricing flexibility if competing fuels turn costlier. The call hinges on operational leverage in industrial volumes and the ability to protect margins as customers adjust fuel choices.

Morbi ceramic cluster: propane shortage shifts the mix

A central part of Nomura’s thesis is the Morbi ceramic cluster in Gujarat. Nomura said several ceramic players that rely on propane are in discussions with Gujarat Gas to switch to natural gas. It added that this development “significantly alters” the company’s outlook in the region and could support strong volume growth. Nomura also noted that Morbi-based producers are planning price hikes of 15% to 25% to pass on higher fuel costs. The brokerage said the propane shortage could allow Gujarat Gas to earn healthy margins, provided switching accelerates and supply remains supportive.

LNG prices and near-term pressure: what changed in estimates

Nomura flagged that spot LNG prices are “quite high” and can pressure margins in the near term. Reflecting this, it cut FY27F EBITDA by 8% to factor margin pressures. At the same time, it raised FY28F EBITDA by 14% on expectations of increased margins in the industrial segment and slightly higher volumes. The brokerage noted that Gujarat Gas tends to benefit when industrial usage increases relative to LPG because a bigger chunk of its volumes comes from the industrial segment. Investors will be watching whether the fuel-switching trend sustains beyond the immediate disruption.

Pump prices and CNG competitiveness: elections as a marker

Nomura said the Iran-US conflict has sharply driven up crude oil prices, creating losses for fuel retailers in India despite excise duty cuts. It added that it sees a strong likelihood of petrol and diesel price hikes after state elections conclude on April 29. Nomura’s view is that higher pump prices could improve the cost competitiveness of CNG vehicles. It also said this could give Gujarat Gas greater pricing flexibility. These observations are framed as a potential tailwind rather than a confirmed outcome.

Policy angle: proposed piped gas framework after LPG disruption

Nomura said the recent LPG crisis has prompted the government to propose a new piped gas framework. As described, the framework would mandate a shift to PNG where pipeline infrastructure is available. Nomura sees this as a long-term structural tailwind for PNG adoption. In its view, wider PNG use can support volume growth over time for city gas distributors, including Gujarat Gas. The pace of benefit would depend on implementation and the availability of last-mile infrastructure.

A more cautious read: Elara flags logistics-driven disruption

Elara Securities took a more cautious stance on the episode. It said the LPG supply disruption during the conflict was largely logistics-driven. Elara also noted there was no significant damage to refining infrastructure. The contrast matters because logistics constraints can ease faster than structural supply losses, potentially normalising fuel availability. That, in turn, can influence how quickly industrial customers commit to longer-term fuel switching.

Key numbers at a glance

Separate track: restructuring and merger-related figures in circulation

Alongside the trading update, investor documents and earlier market reports referenced a broader group restructuring around Gujarat Gas (GGL), Gujarat State Petroleum Corporation (GSPC), Gujarat State Petronet (GSPL), and GSPC Energy (GEL), including a demerger into GSPL Transmission Ltd (GTL). One set of analyst expectations cited value creation of Rs 7,200 crore through carry-forward losses. Another note stated GSPC’s tax credits of Rs 7,200 crore could mean no tax incidence for 6 to 8 years after completion, with management indicating an overall validity of 8 years post-merger completion. Nomura also quantified operating sensitivity, saying Gujarat Gas’ FY26 EBITDA and EPS have a sensitivity of 8% and 9%, respectively, to every Re 0.5 per scm reduction in gas sourcing costs.

What investors are tracking next

The immediate swing factors remain fuel availability, spot LNG pricing, and the speed of switching in Morbi. Nomura has explicitly built in near-term pressure via its FY27F EBITDA cut, while positioning for better economics in FY28F. Market participants will also watch policy follow-through on the proposed PNG framework, given the long lead times for infrastructure and customer conversion. For the stock, the key near-term anchor is whether operational data lines up with the improved industrial margin and volume assumptions behind the FY28F upgrade.

Conclusion

Gujarat Gas’ near-8% rally followed Nomura’s double-upgrade to ‘Buy’ and its Rs 390 target, with the brokerage leaning on Morbi-led demand visibility, potential pricing flexibility, and a FY28F EBITDA raise of 14%. The next meaningful signposts will be developments in industrial switching behaviour, spot LNG trends, and any concrete steps around the proposed piped gas framework.