Buy GAIL (India); target of Rs 135: YES Securities

YES Securities' research report on GAIL (India)

GAIL reported 3QFY23, significantly below estimates, with operating profit at Rs 2.6bn (-94% YoY; -85% QoQ), primarily on Rs 11bn in inventory losses related to two unsold cargoes. Adjusted for the same the operating profit stood at Rs 13.6bn, which nonetheless, is still lower than our estimates (YES: Rs 17.2bn), due to operating losses in LPG-LHC segment. GAIL continues to reel under the disruption of supply from Gazprom, impacting its gas trading and petrochemical segments. While GAIL is in negotiation with other suppliers to fulfill the gap of 8-9mmscd, but at this moment any conclusive update on the same is pending.

Outlook

GAIL has additionally filed for revision in tariff as per revised regulations and tariffs are likely to be updated by Apr’23. While there are near-term challenges but maintain BUY on long term fundamentals, as stock continues to trade at inexpensive valuation of 8x FY25e.