1:2 Bonus Issue: BUY/SELL Maharatna PSU Oil & Gas Stock That Rose By 2,573% On NSE; Highest Target Rs 250

Maharatna PSU oil and gas giant, GAIL (India) witnessed sharp buying on June 12, making the stock near its 52-week high. The PSU stock is currently above Rs 217 and has witnessed all-time gains of 2,573% on NSE. However, brokerages have mixed recommendations for the stock, with Prabhudas Lilladher advising 'SELL' in the stock, and global brokerage Morgan Stanley being overweight on the stock.

GAIL's share price was at Rs 217.27 apiece on NSE, up by 2.07% on June 12 with a market cap of Rs 1,42,857.19 crore. The large-cap stock was nearing its 52-week high of Rs 233.20 apiece which was touched in early June. While the stock has more than doubled from a 52-week low of Rs 103.30 apiece.

YTD, the stock is up by 31%. But in a year, the stock zoomed by 103% on NSE. Its all-time gain is about 2,572.45%. The stock was merely at Rs 8.13 on July 6, 2001.

SELL GAIL Stock:

In its research note, Prabhudas Lilladher said that India's trunk gas pipeline network is expected to rise from 23,391km in FY24-end to 27,516km in the next 3-4 years. GAIL's network is expected to rise from 16,240km to 19,970km (including spur lines) in the next 2-3 years.

The brokerage expects GAIL's transmission volume to rise from 120mmscmd in FY24 to 130/140mmscmd in FY25/26E.

However, Prabhudas also believes that increasingly, consumers are securing their contracts directly, thereby dampening the expected growth rate in trading. Incremental petrochem projects are also margin-dilutive.

Considering the slow growth in transmission and low return ratios for petrochem expansions, Prabhudas remains negative on the stock with a SELL rating and target price of Rs170, valuing it at 12x FY26 standalone EPS and adding the value of investments.

Meanwhile, JP Morgan is NEUTRAL on the stock with a target price of Rs 184 per share. The outlook is also neutral.

BUY GAIL Stock:

Brokerage Morgan Stanley is overweight on GAIL and has suggested a target price of Rs 250 with a positive outlook.

Moreover, Nirmal Bang's report also said that the Weekly chart suggests that the stock is in an upward-rising channel suggesting a potential move in the near term. Also, it said, "Interesting fact is that's price is rising along with decent volume indicates strength," adding, "Directional indicator ADX is showing strength."

Hence, Nirmal Bang recommends BUY on dips in GAIL FOR a Target of Rs 238 with a strict stop loss of Rs 184.

GAIL did not announce any dividend after the Q4 results. But it is among the top dividend-paying PSU stocks with high yields. Currently, it has a dividend yield of 2.81%. In the last 12 months, the company paid up to Rs 5.50 dividends per share. As per Trendlyne data, GAIL has paid up to 47 dividends since September 2001.

Apart from dividends, GAIL also has a long track record of rewarding bonus shares. The first time, GAIL turned ex-bonus was on October 6, 2008, for its bonus issue in the ratio of 1:2. After nearly a decade, GAIL rewarded two back-to-back bonus shares of 1:3 each in March 2017 and March 2018. Later on, the company also paid bonus shares in the ratio of 1:1 in July 2019. The latest bonus issue is of 1:2 which was in September 2022.

FY24 Revenue from Operations stood at Rs 1,33,500 crore in FY24 as against Rs 1,45,875 crore during FY23. PBT in FY24 stood at Rs 12,595 crore (up by 74%) as against Rs 7,256 crore in FY23. PAT (excluding Non-controlling interest) was Rs 9,899 crore in FY24 (up by 76%) as against Rs 5,616 crore in FY23.

Recently, GAIL installed its first Green Hydrogen Plant at GAIL Vijaipur in Madhya Pradesh. This Green Hydrogen plant has a capacity of producing 4.3 TPD of Hydrogen, through 10MW PEM (Proton Exchange Membrane) Electrolyzer units, by electrolysis of water using renewable power. The purity of hydrogen from this plant shall be 99.999% (by vol.) and will be produced at a pressure of 30 Kg/cm2.

Besides sourcing renewable power through open access, GAIL is also setting up around 20 MW Solar power plants at Vijaipur (both Ground Mounted and Floating) to meet the requirement of green power for the 10 MW PEM Electrolyzer.