Motilal Oswal, a well-known brokerage firm, has recently projected a 19% increase in the stock value of Gujarat Gas, estimating a target price of Rs 475 per share. The firm attributes this optimistic outlook to two significant factors that are reshaping the company’s financial landscape.

Decline in Crude Oil Prices

One of the primary reasons for this positive forecast is the anticipated drop in Brent crude oil prices, which are expected to average $65 per barrel for FY26-27, down from an earlier estimate of $70. In their analysis, Motilal Oswal noted that while Brent crude averaged $75.8 per barrel in the last quarter of FY25, they foresee a reduction to $65 in the upcoming fiscal years. The brokerage explained that for every $10 decrease in Brent prices, the landed cost of natural gas declines by approximately $2.3/mmbtu.

Expansion of Global Gas Supply

The second factor influencing Gujarat Gas’s financial health is the projected expansion in global LNG supply, which is expected to lead to lower pricing slopes for natural gas. This combination of a declining crude oil outlook and increased natural gas supply will likely enhance the competitiveness of natural gas against propane. Motilal Oswal highlighted that discussions with various City Gas Distribution (CGD) companies in India indicate that new long-term gas contracts are being signed with a 1.0-1.3% lower slope, reflecting the anticipated LNG surplus in the second half of FY26 and beyond.

Recent Stock Performance

In the past six months, Gujarat Gas’s shares have dropped by 34%, primarily due to rising spot LNG prices, which have inflated raw material costs. Additionally, decreased industrial commercial PNG volumes, driven by sluggish ceramic exports and heightened competition from other fuels like propane, have contributed to this decline.

Despite these challenges, Motilal Oswal believes that the period of valuation de-rating is nearing its end.

Future Outlook

The brokerage firm predicts limited downside risk from current stock levels, driven by potential margin expansion and a robust growth forecast for CNG volumes. They also anticipate a rebound in Morbi volumes starting in the first quarter of FY26. Their report suggests that if the company’s fundamentals improve, both margin and volume estimates might experience upward revisions.

Gujarat Gas Stock Summary

• Recent performance: Gujarat Gas shares have decreased by 0.8% over the last five trading days.
• Monthly return: The stock has yielded a modest 5.7% return over the past month.
• Long-term decline: Over the last six months, it has seen a 34% drop and a 28% decrease over the past year.

As the market navigates these fluctuations, investors may want to keep a close watch on Gujarat Gas, especially as new developments in global gas supply and crude oil prices unfold.