Morgan Stanley maintained an 'Overweight' rating with a target price of Rs 258 per share, noting the company’s 19 percent integrated return on equity (RoE) for its gas pipeline business. They pointed to the ongoing volume growth and increasing domestic gas penetration as multiple catalysts for future stock gains, and valued GAIL at 1.2x its FY26 estimated price-to-book ratio.
Meanwhile, Jefferies upgraded GAIL India to a 'Buy' with a target price of Rs 240 per share, citing a 7 percent YoY EBITDA increase, which, though slightly below estimates, benefited from improved gas tax and petrochemical performance.
Jefferies highlighted GAIL's expanding market share driven by new pipeline infrastructure, with additional projects expected to come online by mid-2025. They also anticipate trading profitability to stay robust due to low Henry Hub gas prices, projecting a 9 percent compound annual growth rate (CAGR) in EBITDA from FY24 to FY27.
With the stock having corrected 20 percent from its recent peak, the brokerage sees an attractive risk-reward profile.
GAIL reported a 10 percent increase in consolidated net profit at Rs 2,690 crore in Q2FY25. Its revenue from operations came in at Rs 33,981 crore in Q2, a marginal increase from Rs 33,049 crore a year ago.
In the quarter under review, the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) from the natural gas transmission segment was at Rs 1,402 crore, compared to Rs 1,294 crore in the year-ago period. The company’s petchem segment reported an EBIT of Rs 146 crore in the quarter, against a loss of Rs 161 crore last year.
GAIL's CMD Sandeep Kumar Gupta said the petrochemical segment is expected to be reasonably profitable in FY25. Meanwhile, GAIL’s natural gas marketing segment EBIT fell to Rs 1,254 crore in Q2 from Rs 1,722 crore in the same period last year.
The company incurred capex of Rs 1,885 crore during the current quarter, mainly on pipelines, petrochemicals etc., taking cumulative capex up to H1FY25 to Rs 3,544 crore, GAIL said in a press release.
GAIL India shares closed marginally higher at Rs 196.80 on the National Stock Exchange (NSE) in the previous session. The stock has gained 18 percent so far this year, outperforming Nifty's returns of 10 percent.
In the past 12 months, the counter has rallied 60 percent compared to a 23 percent rise seen in Nifty during this period.
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Published on November 06, 2024 / 09:26 IST