Buy GAIL; target of Rs 235: Motilal Oswal

Motilal Oswal's research report on GAIL

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 weakerthan- expected performance in the trading segment, a one-off depreciationrelated charge of INR1.7b, and lower-than-expected other income. This was partly offset by a strong performance in the petchem and LPG segments, with EBIT coming ahead of our expectations. GAIL anticipates a robust domestic gas demand, projecting gas transmission volumes to reach 132mmscmd by end-FY25 and 142mmscmd by end-FY26. For the trading segment, management guided an EBIT of INR40-45b, while
for the petchem segment, it remained hopeful of a healthy FY25 profitability amid weaker spot LNG prices.

Outlook

We value the core business at 13x FY26E adj. EPS of INR15. Adding the value of listed and unlisted investments of INR40, we arrive at a TP of INR235. Reiterate BUY.