Sharekhan's research report on GAIL (India) Ltd
The gas transmission business has multiple growth drivers in terms of volume growth/tariff improvement. We expect 9% CAGR over FY23-26E for gas transmission volume and reach 140 mmscmd in FY26E. Petchem segment expected to turnaround gradually given improved plant utilisation, likely better HDPE prices as capacity addition to lag demand growth and soft LNG prices. Likely monetisation of stake in GAIL Gas (wholly owned subsidiary of GAIL) could unlock value and add ~8% (or ~Rs. 15/share) to GAIL’s valuation.
Outlook
We reiterate a Buy rating on GAIL with a raised PT of Rs. 190 given our expectation of strong earnings growth, potential improvement in earnings quality (higher earnings share of core gas transmission + RoE of 15.8% in FY26E) and reasonable valuation of 7.5x FY26E EV/EBITDA, 9.8x FY26E EPS and 1.5x FY26E P/BV.
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