'Buy' GAIL Maintains Motilal Oswal On Robust Transmission Outlook; Petchem Diversification To Fuel Growth

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Motilal Oswal Report

GAIL India Ltd.'s share price has corrected 30% over the past five-and-a-half months and now trades at 8.1 times standalone one year-fwd. P/E (excluding listed investments).

We foresee limited downside from the current level amid robust transmission volume growth, a steady marketing outlook and a diversified petchem portfolio. FY27E dividend yield of 4.3% is ~56% above the 10Y median dividend yield and looks attractive. We cut our Ebitda/PAT estimates by 7% to 11% for FY26/FY27, as we-

1. lower our petchem margins amid sequentially weak spreads and soft outlook,

2. build in three-six-month delays in the commissioning of upcoming petchem facilities,

3. slightly moderate our FY26/FY27 transmission volume assumptionsto 140/150 mmcmd (versus 144/154 mmscmd earlier),

4. marginally lower our marketing segment Ebitda.

We now value gas transmission, marketing and petchem segments at EV/Ebitda of eigth times/five times/5.5x. Accordingly, we reiterate Buy on GAIL with our SoTP-based target price of Rs 195.

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