'Buy' GAIL India, Maintains ICICI Securities On Attractive Valuation, Strong Prospects — Sees Up To 35% Upside

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ICICI Securities Report

GAIL India Ltd.’s Q3 FY25 result disappointed the street, with multiple one-offs dragging trading segment earnings and reigniting the long-held apprehension on the unpredictability of trading segment. The stock has reacted negatively, with ~23% decline over the last six months. However, we believe earnings may improve steadily over the next 12 months, driven by:

1. One-offs impacting trading have resolved somewhat in Q4-to date and should have limited impact over FY26,

2. Sustained volume growth for transmission/trading as gas demand grows over FY26-27E,

3. gas costs for petchem may remain flat and realisation should somewhat improve,

4. tariff order gets closer, with release of a public consultation document on tariff norms and

5. valuation remains attractive.

Reiterate Buy, with target price of Rs 245.

Key downside risks-

1. Sharply lower gas consumption trends.

2. Higher gas price impact on petrochemical/LPG segment.

3. Reduction in pricing gap between US LNG and Asian spot LNG prices.

Key upside risks-

1. Higher gas demand.

2. Higher-than-expected moderation in gas costs.

3. Successful upward revision in tariffs by regulator to factor in GAIL’s submissions on cost of internal usage of gas.

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