Buy Gail India; target of Rs 240: ICICI Securities

ICICI Securities's research report on Gail India

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. However, lower-than-estimated transmission volumes of 123.5mmscmd (est.: 125mmscmd) and a write-down of some pipeline assets of INR 1.7bn dragged earnings below estimates of INR 38bn EBITDA/INR 26bn PAT. Even with this high base, FY25–27E EPS prospects appear promising, with a steady growth in transmission volumes, advantageous pricing differentials for trading, steady improvement in Petchem and LPG margins and higher Petchem volumes as well. Our revised FY25–27E EPS implies a CAGR of 6.4% in EBITDA/6.7% in PAT, with attractive valuations underpinning our continued BUY rating with revised TP INR 240/sh

Outlook

We factor–in higher margins for the two segments for FY25E/26E/FY27E versus our earlier estimates, with upgrades to transmission and trading segments complementing the same. Valuations of 9.6x FY26E EPS and 8.2x FY26E EV/EBITDA are attractive and our revised TP of INR 240/share implies ~18% upside from here. Maintain BUY.