Buy GAIL; target of Rs 195: Motilal Oswal

Motilal Oswal is bullish on GAIL recommended buy rating on the stock with a target price of Rs 195 in its research report dated March 20, 2025.

Broker Research

March 21, 2025 / 11:56 IST

Buy

26 Aug, 2025 12:21

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Motilal Oswal's research report on GAIL

In the last five-and-a-half months, GAIL’s share price has corrected ~30% with the stock now trading at 9.2x FY27E P/E. We maintain our positive outlook on GAIL, based on the following factors: Strong transmission and marketing outlook: We estimate a 7% CAGR in transmission and marketing volumes over FY24-27. The International Energy Agency (IEA) estimates India’s natural gas consumption to rise 60% by 2030 from 65bcm in 2023. Further, IEA estimates India’s LNG consumption to grow at 11% p.a. over 2023-2030, driven by the city gas distribution (CGD), power and industrial sectors. GAIL will be the key beneficiary of rising gas penetration in India. Key catalysts for GAIL in FY26 include the start of 3,115km new pipelines and a potential tariff hike in 1QFY26 (5% PAT impact). Larger and more diversified petchem capacity to power earnings: GAIL is set to expand its petrochemical capacity from 810ktpa currently to ~2.7mmtpa by FY27 as PDH-PP and Gail Mangalore Petrochemicals Ltd projects commence operations. Further, the petchem product mix is set to diversify, with the share of ethylene and derivatives decreasing from 100% to 30% of the portfolio as new projects come online. Feedstock sources too will be diversified, with PX and propane making up 70%. Overall, we believe a diversified product slate should help to reduce petchem earnings volatility and position the segment as a major profit driver for the company.

Outlook

144/154mmscmd earlier), 4) marginally lower our marketing segment EBITDA. We now value gas transmission, marketing and petchem segments at EV/EBITDA of 8x/5x/5.5x. Accordingly, we reiterate BUY on GAIL with our SoTP-based TP of INR195.

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