Our 2026YE target price of $32/ADR relies on a DCF model with a 15.4% WACC and a perpetuity growth assumption of 3.5%. Our base already factors in ~$3bn in growth opportunities linked to: (i) GPM pipeline expansion; and (ii) the NGLs Vaca Muerta expansion at an avg. leveraged IRR of 23% in USD, which explains $9.3/ADR of our target price.

We assign a High Risk rating to TGS given the still-challenging macroeconomic adjustment that Argentina needs to deliver. The following risks could prevent the stock from reaching our target price:  

(1) Argentina risk. Lower investor appetite for Argentinian (or higher risk aversion) could have a negative impact on the shares.  

(2) Commodities prices. TGS is exposed to commodity price risks as the Vaca Muerta expansion relies of upstream companies ability to develop the massive reservoir opportunity. Changes in its domestic fuel pricing policy are important for the company's cash flow.  

(3) Regulatory risk: TGS has 33% of its EBITDA (LTM) coming from regulated business, which in Argentina has sometimes been linked to politics. We expect this risk to be diluted over the coming years as private contracts gain momentum.     

(4) Political risk. Argentina has become a macro trade which relies on the reformist agenda of President Milei. Lack of continuity could trigger risk aversion. Nevertheless, we think the Vaca Muerta investment case has solid fundamentals and it has become less linked to the domestic economy given that growing production is being exported to international prices.