GAIL shares surge even as Q3 net profit dips 90%; stock seen to rally above ₹100

“GAIL is a diversified play on India’s gas consumption with growth driven by transmission/marketing volume growth and higher petchem capacity. Management has guided for ₹300 bn in capex over FY23–25E. We are revising FY24E/25E EBITDA by -5%/4%, and retaining ‘BUY’ with a target price of ₹111,” said brokerage Edelweiss.

Sandeep Kumar Gupta, Chairman and Managing Director of GAIL, said the company’s revenue from operation has crossed ₹1 lakh crore during nine months ended December 31, 2022, which is highest-ever in any financial year.

“We maintain Accumulate on GAIL due to limited upside and limited visibility in earnings in gas trading/chemical segments, which mars the potential for revival from what we believe is a trough in its earnings. During the earnings call, the management hinted that the dependence on spot LNG will persist until domestic supplies increase. Hence, the Petchem utilisation is unlikely to revive unless the gas feedstock required can be sourced at competitive prices, as running the gas cracker on spot LNG above $16/mmbtu is not sustainable, according to GAIL,” as per brokerage Nirmal Bang which has a target price of ₹101 on GAIL shares.

GAIL reported disappointing results, as per analysts at Prabhudas Lilladher, however, availability of 0.5MTPA US LNG volumes along with softening LNG prices of $20/mmbtu and likely higher pipeline tariffs will drive earnings, in their view. They have also reiterate ‘BUY’ on the stock with a target price of ₹123 ( ₹120 earlier)

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.