.png 2.png?downsize=773:435 "GAIL India Shares Can Rally 31% Says ICICI Securities Maintaining 'Buy'")
GAIL's FY25 performance was steady, with ~8% growth in Ebitda and ~7% growth in PAT. Going forward, the company is set to see strong profitability via the imminent tariff increase in the transmission business, but the company is cognizant of headwinds in gas demand for FY26.
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ICICI Securities Report
We have factored in lower estimates for trading Ebitda (6–10% decrease over FY26– 27E vs previous estimates) and for transmission volumes (2–6mmscmd lower vs previous estimates for FY26–28E), offset by marginally higher tariff estimates.
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Resultantly, FY26E/FY27E EPS sees a cut of ~5.8%/4.6%, while FY28E EPS stays largely unchanged. We continue to see multiple drivers of optimism for the stock. Nearly 15-18mmscmd of volume addition over FY26–28E and stronger tariffs and additional delta from petchem (JBF acquisition to add capacity) imply that GAIL India Ltd. could see steady earnings growth over FY26–28E.
Post a muted stock movement in the last six months (down 7%), valuations of 9.9x FY27E EPS and 7.4x FY27E EV/Ebitda are attractive; separately, our revised target price of Rs 245 (FY28E multiples) offers ~31% upside from current market price.
Maintain Buy.
Key downside risks
Sharply lower gas consumption trends.
Higher gas price impact on petchem/LPG segments.
Reduction in pricing gap between US LNG and Asian spot LNG prices.
Key upside risks
Higher gas demand.
Higher-than-expected moderation in gas costs.
Successful upward revision in tariffs by regulator to factor in GAIL's submissions on cost of internal usage of gas.
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