Hold GAIL India target of Rs 204 Prabhudas Lilladher

Prabhudas Lilladher's research report on GAIL India

We re-rate the stock from ‘Sell’ to ‘Hold’ with a TP of Rs204 due to correction in stock price. GAIL reported lower-than-estimated results with an EBITDA of Rs37.4bn (down 17.3% QoQ, PLe: Rs41.5bn, BBGe: Rs40.3bn), while PAT came in at Rs26.7bn (down 1.9% QoQ, PLe: Rs25.1bn, BBGe: Rs25.4bn). Decline in earnings was on account of decrease in transmission and trading margins. Transmission volume decreased ~1% QoQ with its EBITDA declining 8.1% QoQ, while trading volume decreased 2.9% QoQ with its EBITDA declining 33.8% QoQ. Going forward, we build in volume growth of 8%/5% CAGR in the transmission/trading segment over FY24-27E to reach 152/110mmscmd in FY27.

Outlook

The stock is currently trading at 15/14.8x FY26/27 EPS. We upgrade to ‘Hold’ with a TP of Rs 204, valuing it at 13x avg FY26-27 adj EPS of Rs12.9 and listed/unlisted investments at Rs36.

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