Sharekhan has given Buy recommendation for GAIL (India) with a target price of Rs. 196 in its research report issued on Jun 10, 2021
Sharekhan’s research report on GAIL (India)
Q4FY2021 PAT of Rs. 1,908 crore (up 28.3% q-o-q) was 15.6% above our estimate, led by strong performance across commodity-linked businesses of petchem/LPG-LHC/gas marketing supported by higher oil price. Q1FY2022 gas transmission volume to get impacted by lockdown in April 2021-May 2021 and petchem utilisation due to maintenance plant shut down; however, high HDPE, LPG, and spot LNG prices would keep profitability strong. Earnings growth outlook (expect a 29% PAT CAGR over FY2021-FY2023E) has improved considerably, given high profitability for petchem and LPG-LHC segments post the sharp rally in oil price to <$70/bbl. Transmission volume to grow steadily at 6-8% volume p.a.
Outlook
Valuation of 7x its FY2023E EV/EBITDA seems attractive, given expectation of strong earnings revival and potential value unlocking from monetisation of gas pipeline assets. We maintain our Buy rating on GAIL with a revised PT of Rs. 196.