5 Bonus Shares, 47 Dividends, 5.2% Yield: JM Financial Recommends BUY On Maharatna PSU GAIL For Rs 195 TP

GAIL (India), a Maharatna oil and gas stock, is in focus after it trimmed its CNG prices across various locations. Also, the company hosted analysts and brokerages at its Vijaipur facility. Following this, brokerages are optimistic about GAIL's share price and outlook ahead. JM Financial has recommended buying for a target price of Rs 195 apiece.

This natural gas company is among dividend king stocks, with a high dividend yield. Also, in stock has a strong track record of rewarding bonus shares to its investors from 2008 to 2022.

GAIL (India) Share Price:

On BSE, GAIL's share price stood at Rs 183.20 apiece, down by 2.84% with a market cap of Rs 1,20,455.83 crore on March 11th.

The stock's 52-week high and low are at Rs 196.35 and Rs 102.10 apiece respectively.

GAIL (India) Dividend:

As per Trendlyne data, GAIL has delivered 47 dividends since September 2001. In the last 12 months, the company paid dividends up to Rs 9.50 per share.

On the current market price, the dividend yield is at 5.18%.

GAIL (India) Bonus Shares:

The first time, GAIL turned ex-dividend 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 last bonus issue was done on September 6, 2022, in a ratio of 1:2.

GAIL Growth:

The Consolidated Revenue from Operations every quarter was up by 5% to Rs 34,768 crore in Q3 FY24 as against Rs 33,050 crore in Q2 FY24, PBT registered a growth of 30% 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.

Also, on a Consolidated basis, Revenue from Operations stood at Rs 1,00,666 crore for up to Q3 FY24 as against Rs 1,12,611 crore in the corresponding period of the previous year. PBT for up to Q3 FY24.up by 45% to Rs 9,496 crore as against Rs 6,567 crore for up to Q3 FY23. PAT (excluding Non-controlling interest) is up by 49% to Rs 7,431 crore for up to Q3 FY24 as against Rs 4,982 crore for up to Q3 FY23.

JM Financial's Outlook, Target Price On GAIL:

Analysts note said, "We recently visited GAIL's Vijaipur facility. The management underscored why Vijaipur is considered the company's most important facility - it is the intersection point of the key HVP pipeline network, has a C2-C3 extraction and LPG storage unit and has successfully commissioned the small-scale LNG (SSLNG) production project. Further, GAIL is setting up a 4.3TPD green hydrogen plant there at a capex of INR 2.3bn as a pilot; this should help it to scale up green energy investment in future."

However, the brokerage also highlighted that the management highlighted that GAIL's LPG output has been constrained due to the ongoing decline in ONGC's rich Mumbai high APM gas production while it is difficult to get rich gas via the LNG route.

On valuation, the analysts note, "We raise our FY25-26 EBITDA estimate by 11-14% primarily due to: a) continued strength in gas trading EBITDA (increased to INR 52-55bn p.a. in FY25-26 from INR 41-42bn earlier) aided by fall in US Henry Hub (HH) gas price; b) and increase in our Brent crude price assumption to USD 70/bbl (from USD 65/bbl earlier). Hence, our TP has risen to INR 195 (from INR 175), also incorporating a rise in the value of other investments (which is valued at CMP less 20% holding discount)."

Additionally, the note said, "We maintain BUY due to steady volume growth visibility in the gas transmission and trading business, coupled with higher tariff, on account of various policy tailwinds (given the government's target to increase the share of gas in India's energy mix to ~15% by 2030 vs. ~7% currently). Our TP comprises a) core business value of INR 169/share; b) other investments at INR 46/share; and c) net debt of Rs 20/share. At CMP, the stock trades at 1.8x FY26E P/B and 12.4x FY26E PE. Key risks: a) sharp weakness in crude/spot LNG and/or jump in US HH gas price posing risk to US LNG margin; b) slow recovery in domestic gas demand impacting volume for gas transmission and trading segment."

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