1:2 Bonus Issue: Maharatna PSU Oil & Gas Stock Rises 115% From Lows, Time To Book Profits Or BUY?

GAIL (India) will resume trading on June 18 as the market will open after a long weekend. Oil and gas stocks have taken the limelight as the buzz is that the government is reviewing natural gas products under the GST regime. If this happens, Jefferies believes it could aid faster adoption and support to GAIL's trading volumes and transactions in the medium term. GAIL is currently near its 52-week high of Rs 233 apiece and has surged by nearly 115% from its 52-week low of Rs 103.20 apiece. With GAIL already giving 2x returns, should investors book profits or buy more?

Last week, on BSE, GAIL's share price was at Rs 221.75 apiece on Friday with a market cap of Rs 1,45,802.83 crore. It has a PE of 14.23x and an ROE of 15.97%.

BP Wealth has selected GAIL in its Super 7 picks for June 2024. The brokerage recommends BUY for the target of 236 with a stop loss of 209 in the short term.

Technicals:

As per BP, the price action displays a healthy primary trend. Also, GAIL's price action witnessed high volatility during the recently concluded Lok Sabha election leading to a failed breakout and a breakdown.

Moreover, as the price now heads towards life highs, it indicates that committed buyers continue to showcase holding strength which is a positive sign. Additionally, the RSI across daily and higher timeframes are trading well above their median. This shows thrust in the price momentum.

Fundamentals:

Furthermore, BP Wealth highlighted two key factors for investment rationale in GAIL stock. They are:

- Market leader in the natural gas transmission business:

The company expects an increase in gas transmission volume by 12 to 15 MMSCMD over the next two to three years. Furthermore, pipelines of around 6,000 km are under construction. Besides, the company earns stable cash flows from its natural gas transmission business.

The company has a diversified revenue stream with an established presence in various other business segments, like city gas distribution (CGD), petrochemicals, liquid hydrocarbons, exploration and production (E&P), and telecom.

- Healthy capex pipeline to bear fruit in future:

The company has planned a capital expenditure (capex) of Rs. 17,000 crores for FY2024-25, with Rs. 3,000 crores allocated to pipeline projects, Rs. 4,400 crores to petrochemicals, Rs. 3,000 crores for net zero initiatives, Rs. 750 crores for operational capex, and Rs. 5,000 crores for equity contributions to joint ventures and subsidiaries. Additionally, the company's board approved laying the C2/C3 liquid pipeline from Vijaipur to Auraiya, estimated to cost Rs. 1,792 crores with a commissioning period of 32 months.

This project aims to increase feedstock availability for additional polymer production at the Pata Petrochemical Complex and reduce energy consumption and carbon footprint.

The LNG and CNG producer is among the leading PSU stocks that pay hefty dividends. As per Trendlyne data, GAIL has paid up to 47 dividends since September 2001.

Meanwhile, GAIL also holds 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.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.