Shares of Gujarat Energy fell as much as 1.23% to ₹253.25 in early trade on Wednesday after Morgan Stanley downgraded the stock to 'Underweight' from its earlier 'Overweight' rating. The brokerage has set a target price of ₹246 from ₹523 earlier, representing a sharp reduction in both rating and target price from Morgan Stanley's previous stance on the stock. According to reports from CNBC TV18 and NDTV Profit, this represents a significant downgrade from the firm's earlier bullish stance on the stock, with the shares opening in the green before declining during early trading.
The recent amalgamation of GSPC, Gujarat State Petronet and GSPC Energy into Gujarat Energy has expanded the company's scale and earnings base, giving the newly amalgamated entity greater exposure across gas retail, trading, regasification and power sectors. As reported by CNBC TV18 and NDTV Profit, Morgan Stanley acknowledged that this scale-up brings benefits, but believes higher exposure to spot LNG, competition from alternative fuels and low operating rates in downstream gas assets make the risk-reward unattractive. The brokerage noted that downstream assets remain underutilised, limiting the benefits from the expanded scale and flagged several concerns about the integration's impact on the company's outlook.
According to Morgan Stanley's analysis reported by CNBC TV18 and NDTV Profit, tighter global LNG markets, Gujarat Energy's elevated spot-gas exposure and improving propane competitiveness increase risks to gas margins and industrial volumes. The brokerage expects global LNG markets to remain tight in H2CY26, keeping gas costs elevated, which is a concern for Gujarat Energy's core retail gas business that remains exposed to costlier LNG even as alternative fuels become increasingly competitive. Morgan Stanley also flagged that the amalgamated entity operates at lower returns than key domestic peers, with potential non-core investments further increasing the risk of lower returns.
Shares of Gujarat Energy were trading 0.8% down at ₹254.50 as of 9:20 am on Wednesday morning, as reported by CNBC TV18. The stock has been under pressure and has delivered a negative 25% return over the last 12 months. According to Bloomberg analyst data cited in the report, the consensus rating remains Buy with 16 of 29 analysts recommending the stock, nine assigning a Hold rating and four recommending Sell. The consensus target is at ₹354.99, which implies an upside of around 38.4% from the last traded price. However, Morgan Stanley prefers refiners over Gujarat Energy, arguing that the current risk-reward remains unattractive despite the stock's low valuation and the integration benefits from the amalgamation.
