55% Dividend, 2.25% Yield; Maharatna Gail India's Record Date Nears; Sharekhan, Elara Set Rs 190-200 TP

Natural gas producer, GAIL India will be in focus this week for its 55% interim dividend payout. The high dividend yield stock with a status of Maharatna will turn ex-dividend on February 6. Ahead of the ex-dividend, brokerages like Sharekhan and Elara Capital have recommended BUY for a target price of Rs 190-200 per share. GAIL touched a fresh record high recently.

GAIL Share Price:

The PSU stock ended at Rs 178.10 apiece, up by 2.6% on BSE with a market cap of Rs 1,17,102.52 crore on Friday last week. The stock price was near its fresh 52-week high of Rs 180 apiece which it recorded on the same day.

In the past five trading sessions, GAIL shares zoomed by 7%. In six months, the upside is nearly 56%.

GAIL Dividend:

The Maharatna company announced an interim dividend of 55% amounting to Rs 5.5 per share on the paid-up equity share capital of the Company.

The company announced Tuesday, February 6, 2024, as the record date for identifying the eligible shareholders of the payout. February 6 is also the ex-dividend date.

Currently, GAIL has a dividend yield of 2.25%.

GAIL Share Price Outlook:

In its latest research report, Sharekhan said, Q3FY24 standalone operating profit was robust at Rs. 3,823 crores, up 9% q-o-q and 22% above our estimate led by a stronger-than-expected performance from gas trading and turnaround of the petchem business. The gas trading business continued its growth momentum with a 6% q-o-q rise in its EBITDA to Rs. 2073 crore, which was significantly above our estimate strength implied gas marketing margin (up 4% q-o-q) and marginal 1% growth in gas marketing volume to 98 mmscmd."

Further, Sharekhan's note said, "Strong marketing segment performance was supported optimization of gas cost through time swap, destination swap and shipping optimization. Petchem segment turned EBITDA positive at Rs205 crore (versus EBITDA loss of Rs. 38 crore in Q2FY24) reflecting higher petchem volume (up 28% q-o-q to 215kt) and optimization of gas cost. LPG-LHC segment posted EBITDA of Rs. 280 crore (versus only Rs. 5 crore in Q2FY24) led by higher LPG-LHC realisations (up 32% q-o-q). However, gas transmission segment EBITDA declined by 5% q-o-q to Rs 1561 crore due to higher cost while gas transmission volume stood at 122 mmscmd (up
1% q-o-q). Standalone PAT at Rs. 2,843 crore (up 18% q-o-q) was 29% above our estimate reflecting strong performance from gas trading/petchem/LPG-LHC segments, higher dividend income, lower interest cost and tax rate."

In Q3FY24, the company's Consolidated Revenue from Operations on quarterly basis up by 5% to Rs 34,768 crore as against Rs 33,050 crore in Q2 FY24, PBT registered a growth of30% to Rs 4,075 crores in Q3 FY24 as against Rs 3,138 crores in the previous quarter. PAT (excluding Non-controlling interest) increased by 31 % to Rs 3,195 crore in Q3 FY24 as against Rs 2,444 crore in the previous quarter.

On the valuation, Sharekhan said, "We expect GAIL to post a strong earnings recovery across its business segments supported by stabilising global LNG supplies and improving price environment for its commodity businesses. Valuation of 7.7x its FY2026E EV/EBITDA given expectation of a strong earnings growth and a healthy dividend yield of 3-4%. Hence, we maintain our Buy rating on GAIL with a revised price target (PT) of Rs. 200."

Meanwhile, in its latest note, Elara Capital said, "We up FY25E/26E EPS 7%/11% due to higher gas transmission and marketing volume. Thus, we raise TP to INR 191 (from INR 165). However, we revise GAIL to Accumulate from Buy as the stock has runup 45% in the past three months, partly factoring in strong gas volume growth outlook, led by accelerating downstream CGD infrastructure and +150mn tonnes new LNG export capacity addition globally in the next four years."

Lastly, Elara's note said, "We value GAIL on SoTP, assuming 5.0x (unchanged) FY26E petrochemical EV/EBITDA, 5.0x (unchanged) FY26E LPG and LHC EV/EBITDA, 9.2x (unchanged) FY26E EV/EBITDA for transmission and 4.5x (from 4.0x) FY26E gas marketing EBITDA."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.