Prabhudas Lilladher has maintained a 'Hold' rating on Gujarat Energy but lowered its price target to ₹275. The revision follows volume challenges in the Morbi industrial cluster due to competition from propane, which overshadowed strong performance in the company's gas trading business.
Prabhudas Lilladher has maintained a 'Hold' recommendation on Gujarat Energy (GEL) while reducing its price target to ₹275 from ₹293. This adjustment follows a review of the company's recent quarterly performance, where strong earnings from the gas trading business were offset by volume pressures in the City Gas Distribution (CGD) segment. As of August 12, 2026, the company's stock closed at ₹274.35 on the NSE and BSE.
Morbi Volume Challenges
The primary reason for the downward revision in the target price is the performance in the Morbi industrial cluster. Management noted that a shift in gas supply sources has led to increased availability of propane, which is a cheaper alternative fuel. This has created tough competition, causing gas volumes in the Morbi region to drop to approximately 3 million standard cubic meters per day (mmscmd), compared to the run rate of about 8 mmscmd observed between May and June 2026. Because of this, the brokerage has lowered its volume growth forecasts for fiscal years 2027 and 2028.
Trading Business Provides Support
Despite the volume headwinds, Gujarat Energy reported a strong overall EBITDA, largely supported by its gas trading division. In the first quarter of fiscal year 2027, the company reported a consolidated net profit of ₹1,007.40 crore on revenue of ₹9,771.38 crore. The trading business continues to show stable performance, with management reiterating its EBIT guidance for this segment at ₹11-12 billion and maintaining margins within the 4-5% range. This strong execution in trading helped the company deliver an EBITDA beat, providing a cushion against the slower volumes in the CGD business.
Outlook and Investor Monitorables
While the company has guided for a steady CGD EBITDA per standard cubic meter (scm) between ₹5.5 and ₹6.5, market analysts remain cautious. The brokerage has adopted a more conservative estimate of ₹5.3 to ₹5.7 per scm for FY27 and FY28, reflecting the uncertainty surrounding volume recovery. Investors should monitor how competitive propane prices remain in the Morbi region, as this will be a key factor in whether volume levels can return to previous highs. Additionally, the broader geopolitical situation affecting LNG supply chains will continue to influence gas pricing and availability, which could further impact the company's cost structure and competitive positioning in the coming quarters.