Buy GAIL; target of Rs 220: Motilal Oswal

Motilal Oswal's research report on GAIL

On 27th Nov’25, the Petroleum and Natural Gas Regulatory Board (PNGRB) issued a tariff order for GAIL’s integrated natural gas pipeline network. The tariff has been increased to INR65.69/mmBtu from INR58.61/mmBtu (~12% increase) w.e.f. 1st Jan’26, which is slightly below our expectation of USD67-71/mmbtu. Since we did not build in any tariff hike in our estimates previously, this results in a 7%/8% increase in our FY27 EBITDA/PAT estimates and an increase in our TP to INR220 (from INR205). GAIL’s valuations have corrected sharply from their Sep’24 highs, and the stock now trades close to its historical average at ~1.1x one-year forward core P/B, offering limited downside, considering an attractive dividend yield and a robust FCF outlook. Further, the transmission tariff revision, effective from Jan’26, would raise the FY27E PAT by around 7%. Transmission volumes are also set to rebound in FY27 as the impact of multiple oneoff disruptions in FY26 wanes, with a recovery in power and fertilizer offtake and normalization of flood-impacted supplies.

Outlook

Government initiatives to further rationalize natural gas taxation can be a significant long-term positive. Reiterate BUY with a TP of INR 220.