Buy GAIL; target of Rs 200: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on GAIL

GAIL reported EBITDA of INR38.2b in 3QFY24, 10% above our estimate of INR34.7b. It was driven by stronger-than-expected performances in the gas transmission, LPG, and petchem segments. PAT stood at INR28.4b, beating our estimate of INR24.2b (up 12x YoY). Management emphasized that improved realization fueled a strong performance in the Liquid Hydrocarbon segment. Additionally, higher petrochemical sales, improved marketing margins, and reduced costs in the petrochemical segment contributed to an overall robust performance. GAIL anticipates a robust domestic gas demand, projecting gas transmission volumes to reach 124mmscmd by end-FY24. Forecasts indicate a continued annual growth of 10-12% in volumes for FY25-26, with projected figures of 133mmscmd for FY25 and 141mmscmd for FY26 in the segment. Management highlighted that the optimal cost for the petrochemical segment is USD8-9/mmBtu, and the company currently procures and supplies at this rate to the PATA petrochemical plant. The segment's utilization level is at 101%, and no shutdown is anticipated for the PATA plant in the near future.

Outlook

We value the core business at 12x Dec’25E adjusted EPS of INR14.1. Adding the value of listed and unlisted investments of INR31, we arrive at our TP of INR200. Reiterate BUY.

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GAIL - 3012024 - moti