Motilal Oswal's research report on GAIL
PNGRB, in its tariff order dated 22nd Mar’23, has approved a levelized tariff of INR58.6/mmBtu for GAIL’s integrated natural gas pipeline (INGPL), effective 1st Apr’23. To give a perspective, GAIL had proposed an integrated tariff of INR68/mmBtu v/s ~INR43/mmBtu realized during 9MFY23. As a result of the tariff hike, we increase our EBITDA estimate (excluding other income) for FY24 to INR134b from INR116b previously. Similarly, we raise our FY24 EPS estimate by 16% to INR14.4 from INR12.4 previously. LNG prices have plummeted to ~USD12/mmBtu from the peak of USD54/mmBtu. This correction, combined with the recent ramp-up of PATA, should improve the petrochem segment’s performance.
Owing to these positive factors, we reiterate our BUY rating on the stock. We value the stock at 9x adjusted FY25E EPS and add the value of investments to arrive at a TP of INR147, up from INR127 earlier.
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