Emkay Global Financial's research report on GAIL
GAIL reported Q2FY25 SA EBITDA of Rs37.4bn, a 4% slip, mainly due to a 25% miss in gas marketing (lower margins) and 7% miss in transmission (higher opex), partly offset by better petchem and other segments. Management reiterated its transmission volume guidance of >130mmscmd in FY25 and 10-12mmscmd annual growth in FY26-27. Marketing margin guidance of >Rs45bn should also rise post-Q3FY25 results. Petchem should see reasonable profits with healthy utilization. We cut FY25E EPS by 10% to factor in the delay in pipeline tariff hike to FY26 and also trim FY26-27E EPS by 6% each on lower marketing income, petchem deltas, and LPG-LHC realization, due to a cut in our Brent assumption to USD80/bbl from USD85. We retain our target 7.5x EV/EBITDA multiple, given 20% EPS CAGR in FY25-26E.
Outlook
We upgrade GAIL to BUY from Add due to the recent stock correction, and lower Sep-25E TP by 5% to Rs255.
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