Gujarat Gas shares jumped nearly 7% on Friday after international brokerage Nomura double-upgraded the stock from 'Reduce' to 'Buy', citing multiple tailwinds from the US-Iran conflict and attractive valuations following the recent correction. According to reports from The Economic Times, the stock has declined nearly 17% so far in 2026 and more than 21% over the past year, as the ongoing conflict in the Middle East disrupted the Strait of Hormuz—a critical global trade route—triggering a gas supply crunch. The company was forced to invoke the force majeure clause on some of its gas supply agreements, sending the stock into a tailspin along with the broader market. However, bulls have staged a recovery on Dalal Street so far in April, as rising hopes of an early resolution to the Middle East conflict have boosted investor sentiment after a prolonged selloff. Oil and gas stocks, among the worst-hit in March, have been at the forefront of this rebound.
As reported by Nomura, Middle Eastern countries together supplied approximately 80-90% of India's LPG requirements in FY25, with LPG infrastructure in the Middle East, such as Qatar's Ras Laffan, and some refineries in the region being attacked, impacting supplies in the medium term. Despite Indian refiners increasing LPG production by 40%, Nomura estimates that India may still face nearly a 50% LPG supply shortage. With the government prioritising LPG supply to households, industrial customers have been significantly impacted, creating opportunities for companies like Gujarat Gas in the natural gas segment. The Iran-US conflict has sharply driven up crude oil prices, resulting in losses for fuel retailers in India despite excise duty cuts, according to The Economic Times.
According to The Indian Express reports cited by Nomura, ceramic producers in Gujarat's Morbi region, who largely use propane as fuel, are in discussions with Gujarat Gas to shift to natural gas as they look to resume production, which has been suspended since March 17 due to propane shortages. Nomura believes this development significantly alters Gujarat Gas' outlook in the Morbi region, offering opportunities for strong volume growth. Producers are also planning price hikes of 15-25% to pass on higher gas costs, while the propane shortage could allow GGL to earn healthy margins. The brokerage noted that the Iran-US conflict has created unfavorable fuel economics for LNG-linked industrial consumers, which could weigh on Gujarat Gas and Gujarat State Petronet, as LNG prices are expected to remain elevated.
As reported by The Economic Times, bulls have staged a recovery on Dalal Street so far in April, as rising hopes of an early resolution to the Middle East conflict have boosted investor sentiment after a prolonged selloff. Nomura has upgraded Gujarat Gas to 'Buy' with an unchanged DCF-based target price of ₹390, implying an upside potential of over 16% from the previous closing price. The brokerage expects strong likelihood of petrol and diesel price hikes after state elections conclude on April 29, which could improve the cost competitiveness of CNG vehicles and give Gujarat Gas greater pricing flexibility. However, Elara Securities remains cautious, noting that LPG supply disruption during the conflict was largely logistics-driven, with no significant damage to refining infrastructure, suggesting LPG availability is likely to normalise quickly once shipping constraints ease.
The recent LPG crisis has prompted the government to propose a new piped gas framework, mandating a shift to PNG where pipeline infrastructure is available, which could act as a long-term structural tailwind for PNG adoption, supporting volume growth. Nomura has cut FY27F EBITDA by 8% to reflect near-term margin pressures due to high spot LNG prices, but raised FY28F EBITDA by 14% on expectations of improved industrial margins and slightly higher volumes. Despite the positive upgrade, Elara Securities believes LNG supply could remain tight for several years, even if geopolitical tensions ease, keeping LNG costlier than propane in the medium term. With LNG prices expected to remain elevated, a recovery in industrial volumes may be gradual, limiting near-term earnings visibility for Gujarat Gas.
