GAIL Q2 Results Review: Brokerages Divided As Business Outlook Improves But Valuation Remains Concern

Brokerages are divided on the share value of GAIL (India) Ltd. after the corporate reported its September quarter outcomes. Emkay Analysis has upgraded its score to ‘purchase’ from ‘add’ earlier, citing current correction whereas Nuvama retained its ‘cut back’ on valuation issues.

On the identical time, the inventory stays a prime choose within the sector for Citi Analysis, which additionally has an open constructive catalyst watch. “We elevate our FY25-27 earnings per share estimates by 5-8%, following first half efficiency, with our TP (goal value) at Rs 280 vs. Rs 290 earlier as we mark-to-market worth of investments,” Citi mentioned.

Since August, the inventory has misplaced practically 13%. Whereas Emkay Analysis sees this correction as a constructive, Nuvama mentioned that its current downgrade on the inventory to ‘cut back’ was culminating.

“We reckon additional volatility as valuations are nonetheless unsupportive and better earnings of its traditionally unstable gasoline advertising enterprise might normalise quickly,” mentioned Nuvama, which has additionally diminished its goal value for the inventory by 8% to Rs 196, implying 6.18% draw back.

In accordance with Citi Analysis, GAIL’s earnings have bottomed out and the outlook throughout its 4 key enterprise segments has improved. It famous {that a} mixture of the Russian contracted LNG provide disruption, volatility in spot LNG costs, excessive compressor gasoline prices, and rising home APM gasoline costs had adversely impacted GAIL in FY23.

“The gasoline transmission enterprise ought to profit from increased volumes, increased tariffs, and decrease gasoline prices,” Citi mentioned.

The gasoline buying and selling enterprise ought to see diminished volatility going forward, with a big portion of US contracted provides tied up on a back-to-back foundation. The LPG enterprise ought to profit from steady APM gasoline costs, and the petrochemicals enterprise ought to profit from LNG feedstock flexibility and improved utilisations, it mentioned.