Sharekhan has given Buy recommendation for GAIL (India) with a target price of Rs. 175 in its research report issued on Mar 09, 2021
Sharekhan’s research report on GAIL (India)
Recent sharp rally in oil price has improved the earnings outlook for GAIL’s downstream segments – petchem and LPG-LHC. Higher oil/stable spot LNG price of $6-7/mmbtu to improve competitiveness of GAIL’s US LNG contracts and drive strong earning growth (expect a 29% PAT CAGR over FY21E-FY23E). Higher petchem plant utilisation (already at 106%) and commissioning of pipeline infrastructure projects (Urja Ganga and Barauni-Guwahati) to drive sustainable growth for gas transmission/marketing volume. Potential inclusion of gas under GST and likely value unlocking from monetization of gas pipeline assets would be key re-rating catalyst for GAIL in FY2022.
Outlook
GAIL is trading at an attractive valuation of 6.5x its FY2023E EV/EBITDA (27% discount to historical average EV/EBITDA multiple) and offers healthy dividend yield of ~5%. Hence, we maintain our Buy rating on GAIL with a revised PT of Rs. 175.