Buy This Maharatna Energy Stock, On Attractive Valuation, Gain 24% Upside: Top Brokerage Suggests

Top brokerage firm Emkay Global has given a buy rating to the stock of GAIL. the company's Q3 petchem volume target has been set at 100-110tmt with calibrated RLNG usage. On November 4, the company reported a 46% YoY fall in its standalone profit after tax at Rs. 1,537 crore in Q2 FY23, because of supply disruptions from a former unit of Russian energy giant Gazprom. Hence, in the last 5 days, the share price of GAIL fell marginally.

Stock To Buy: Target Price

The Current Market Price (CMP) of Gas Authority of India Ltd (GAIL) is around Rs. 89. Emkay Global has estimated a Target Price for the stock at Rs. 110. This stock has the potential to give a 23.7% return, in the upcoming 12 months. It is a large-cap stock with a market capitalization of Rs. 59,537 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 89
Target Price	Rs. 110
Potential Upside	23.70%
52-week high share price	Rs. 115.67
52-week low share price	Rs. 83

Stock Valuation

Giving a buy rating, Emkay Global stated, "We value GAIL on a SOTP basis, with a 5.0x blended target Sep-24E EV/EBITDA for the SA business and investments at a 30% holdco discount. We maintain buy on attractive valuations. Key risks are adverse commodity price margins, currency, regulations, and outages."

Q2 Earnings

GAIL's Q2FY23 standalone EBITDA/PAT missed the brokerage firm's estimates by 31%/20% at Rs. 17.6bn/Rs. 15.4bn, on weaker gas marketing margins and LPG&LHC earnings, partly offset by lower petchem losses, beat in transmission & Other Income, and lower taxes. Gas transmission EBITDA was down 7% QoQ to Rs. 10.1bn with rise in opex, though volume was down only 2% at 107.7mmscmd.

Marketing EBITDA and volume

Marketing EBITDA fell 81% to Rs. 4.5bn, with volumes down 8% to 92.5mmscmd. RLNG margin stood at USD0.15/mmbtu, down 89%. Petchem utilization fell to 47% due to the Gazprom hit and high RLNG prices. EBITDA loss was Rs. 2.1bn. LPG&LHC EBITDA stood at Rs. 5.2bn, an 18% miss on higher opex. LPG transmission realization and volumes were better than expected.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.