GAIL (India) Ltd. share price target

GAIL’s Q3FY25 result disappointed the street, with multiple one-offs dragging trading segment earnings and reigniting the long-held apprehension on the unpredictability of trading segment.

In the last five-and-a-half months, GAIL’s share price has corrected ~30% with the stock now trading at 9.2x FY27E P/E. We maintain our positive outlook on GAIL.

GAIL’s 3QFY25 performance was significantly below our estimates, primarily due to weak gas marketing segment performance.

We upgrade GAIL to BUY from Add due to the recent stock correction, and lower Sep-25E TP by 5% to Rs255.

GAIL India (GAIL) delivered a strong 7x/2x YoY jump in EBITDA/PAT in Q4 to INR 35.6/INR 21.2bn, with FY24 adj. EBITDA/PAT of INR 143/INR 82bn, up 86%/95% YoY.

GAIL reported an EBITDA of INR36b in 4QFY24, 4% below our estimate, even
as PAT came in 19% below our estimate. The miss was due to a weaker than-expected performance in the trading segment, a one-off depreciation related charge of INR1.7b, and lower-than-expected other income.

GAIL India (GAIL) has delivered another strong performance in Q2FY24, with EBITDA up 2x YoY to INR 34.9bn and PAT up 56% YoY to INR 24bn, well ahead of our EBITDA/PAT estimates of INR 27bn/INR 18bn. Stronger transmission earnings (buoyed by 12mmscmd YoY and 4mmscmd QoQ uptick in volumes), 40% higher tariff YoY (due to new integrated tariffs being applied from 1st Apr’23) and 4.9x YoY improvement in trading EBITDA (up 76% QoQ) helped offset continued weakness in petrochemical and muted LPG earnings.

The prospects for GAIL India (GAIL) continue to strengthen and may drive a sustained period of outperformance over the next 2-3 years, we believe. Growing domestic gas supplies, LNG liquefaction capacity and expectations of relatively moderate pricing of the same, normalisation of LPG prices and some likely improvement in petrochemical segment imply earnings from each key segment should steadily improve over the next 2-3 years.

GAIL India (GAIL) has delivered a strong quarter sequentially in Q1FY24, with EBITDA up 5x to INR 24.3bn and PAT up ~2x QoQ to INR 14.1bn, well ahead of I-Sec estimates of INR 17.9bn EBITDA/ INR 10.3bn PAT, respectively. Stronger transmission earnings, buoyed by 8mmscmd uptick QoQ in volumes, 45% higher tariff QoQ (due to new integrated tariffs being applied from 1.4.23) and 2x QoQ improvement in trading EBITDA, helped offset continued weakness in petrochemical and muted LPG earnings.