Accumulate GAIL; target of Rs 122: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital's research report on GAIL

GAIL’s Q4FY20 results were in line with our estimates on revenue front and above estimates on profitability parameters. Natural gas transmission segment revenues were up 6% YoY and saw marginal decline sequentially due to volumes lost in last 10-15 days of March due to nationwide lockdown, which reduced the consumption in CGD sector and many industries and plants were shut. Gas marketing segment EBIT improved sequentially. Weakness in the petchem business continued due to low demand and low prices. Petchem’s plant had taken a shutdown in first 3 weeks of April’20 and is now operating at capacity utilization of 100%. LPG and LHC production was fairly stable and did not see much impact as they are deemed under essential services. We believe that most of the negatives are priced in the stock. However, the profitability can see a decline due to shut down in first 2 months of FY21, which has started picking up and is expected to return to normalcy by H2FY21.

Outlook

However, it is expected that considering the slump in demand in Q1FY21 GAIL may end up cutting down on spot volumes. The risk to our call remains a significant decline in profitability in the gas marketing segment. We maintain Accumulate, with a TP of Rs 122. (8x FY22E).

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