Following GAIL (India)'s Q1FY27 results, major brokerages have offered mixed views on the state-owned gas utility, with target prices ranging from Rs 190 to Rs 215. While Kotak Securities sees the company as a key beneficiary of recent market disruptions, others maintain a more cautious stance on the sustainability of the recent outperformance.
Kotak Securities Upgrades to 'Buy'
Kotak Securities is the most bullish among the major brokerages, upgrading GAIL from 'Add' to 'Buy' and significantly hiking its target price to Rs 215 from Rs 175. The brokerage noted that GAIL recorded record profits amidst some of the "worst disruptions."
According to Kotak, these disruptions boosted profitability across GAIL's marketing, LPG/LHC, and petrochemicals divisions, while having a minimal impact on transmission volumes. The firm stated that its conviction in GAIL being a key winner from these market disruptions has grown stronger.
Macquarie Maintains 'Outperform'
Macquarie maintained its 'Outperform' rating on the stock with a target price of Rs 205. The brokerage highlighted that the beat in GAIL's gas marketing segment was driven by favorable price-index movements, even as overall volumes fell.
However, Macquarie also noted that management has flagged the outperformance in marketing and LPG as "timing-driven" and likely to moderate in the future. Additionally, petrochemical output was curtailed due to government orders redirecting gas to priority sectors. On the capex front, Macquarie pointed out that over half of the company's Rs 115 billion guidance for FY27 was already spent in the first quarter.
Morgan Stanley Stays 'Equal-weight'
Morgan Stanley maintained an 'Equal-weight' rating on GAIL, though it did hike its target price to Rs 190 from Rs 152. The brokerage titled its note "As Good As It Gets," suggesting limited near-term upside.
Morgan Stanley views GAIL as increasingly tied to the LNG import dynamics of China and Europe, before any potential upside from a US natural gas glut materializes in 2027. The firm noted that European gas inventories are at near three-year lows, coupled with a slower ramp-up of US exports. However, Morgan Stanley maintained its 2027 gas glut thesis, noting it remains in play despite supply challenges from Qatar.
GAIL India Q1 Results
GAIL (India) Ltd. reported a sharp improvement in Q1FY27 earnings result, with consolidated net profit rising more than three-fold sequentially to Rs 4,292 crore as compared to Rs 1,262 crore in the preceding quarter.
Revenue from operations increased 12% quarter-on-quarter to Rs 38,953 crore from Rs 34,773 crore, reflecting stronger business activity during the period.
Operating performance also improved substantially. Earnings before interest, tax, depreciation and amortisation (Ebitda) surged to Rs 6,348 crore from Rs 1,129 crore in the previous quarter. Consequently, the Ebitda margin expanded sharply to 16.3% from 3.2% sequentially.
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