Buy GAIL India ltd; target of Rs 428: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on GAILOperationally in-line result, however beat came at PAT level on account of higher other income which grew by 83% qoq to Rs2.56bn (our est. Rs1.4bn) along with lower tax rate of 28% (our assumption 33%) compare to 34% in 1HFY16. EBITDA came in line with our est. at Rs11.5bn (our est. Rs11bn) and PAT came in at Rs6.64bn (our est. Rs4.7bn). Sequentially, transmission vol. grew by 8% to 97mmscmd and trading volume grew by 4.2% to 77mmscmd on back of higher offtake from standard power plant (~8mmscmd from 4.5mmscmd in previous qtr.). Gross trading margins has improved by 284bps qoq to 4.6% on account of correction in LNG prices which has been monetised by the company. Due to stabilisation of Pata-2, petchem production has improved marginally by 10% qoq to 94k. However, company expect overall utilisation to improve in ensuing quarters as the technical problem has been solved during the quarter. Company has targeted ~120-130kt/quarter production run rate in FY17E Post the benefits of Rasgas renegotiation, we expect turnaround in Petchem business. Moreover, post stabilisation of Petchem plant, we expect gradual volume improvement which would add further to the earnings. Thus, we see almost double the earnings in FY17E to Rs28/share compare to FY16E. Also, other triggers are on card like 1) Upward pipeline Tariff revision and 2) correction in spot LNG price would improves the transmission and trading business earnings. We maintain our BUY reco with TP of Rs428. Currently stock trades at 12.1x FY17 EPS and 1.3x FY17 P/BV.

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