Buy GAIL (India); target of Rs 137: HDFC Securities

HDFC Securities' research report on GAIL (India)

Q1FY24 reported EBITDA/PAT at INR 24/14bn, came in below our estimates, impacted by weak earnings from the LPG and Liquid Hydro Carbon (LHC) segment. However, sharp pick-up in natural gas transmission volumes, higher tariff and higher gas marketing volumes supported earnings. Other income came in higher at INR 2.7bn, however was partially offset by higher interest cost of INR 1.8bn (+3.6x YoY, +95% QoQ).

Outlook

Our BUY recommendation on GAIL with a target price of INR 137 is based on (1) an increase in gas transmission volume to 127mmscmd by FY25 on the back of an increase in domestic gas production, (2) completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment.