Buy GAIL India; target of Rs 245: ICICI Securities

ICICI Securities research report on GAIL India

GAIL’s Q3FY25 result disappointed the street, with multiple one-offs dragging trading segment earnings and reigniting the long-held apprehension on the unpredictability of trading segment. The stock has reacted negatively, with ~23% decline over the last 6 months. However, we believe earnings may improve steadily over the next 12 months, driven by: i) One-offs impacting trading have resolved somewhat in Q4-TD and should have limited impact over FY26 led by: ii) Sustained volume growth for transmission/trading as gas demand grows over FY26-27E, iii) gas costs for petchem may remain flat and realisation should somewhat improve, iv) tariff order gets closer, with release of PCD on tariff norms (see here ) and v) valuation remains attractive. Reiterate BUY, with TP of INR 245.

Outlook

Valuations of 9.1x FY27E EPS and 7.2x FY27E EV/EBITDA are attractive and our revised TP of INR 245 (earlier TP: INR 255) implies ~35% upside from CMP. FY26/27E EPS has been tweaked marginally to factor in lower LPG volumes offset by higher trading margins while we assign a marginally lower multiple to trading business, driving a revised TP of INR 245/sh (earlier INR 255). Maintain BUY.

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