Accumulate GAIL; target of Rs 157: Dolat Capital Market

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26 Aug, 2025 12:21

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Dolat Capital Market's research report on GAIL

GAIL’s Q3FY21 results were above our estimates on revenue and profitability front. Natural gas transmission segment revenues increased 1.8% YoY and by 4.8% QoQ as the CGD sector saw revial with industrial units running at Pre Covid levels. Volumes improved 3.6% QoQ and was flat YoY. Gas marketing segment revenues were down 18.8% YoY and improved 13.3% QoQ. EBIT loss has narrowed down QoQ, however there was a decline due to reduction in the gas marketing spread due to reduction in gas demand. Petchem business has seen a major turnaround. Profitability improved on account of better physical performance and price realisations. EBIT increased due to higher production, decrease in input cost and increase in prices. Petchem plant is now operating at capacity utilization of 100% plus. LPG was fairly stable and demand for LHC products were improved. Profitability of LHC segment improved. 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 in 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 157. (11x FY23E).

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