Buy This Maharatna Stock For 14% Gains, Dividend Declared, Revenue Grew 73.4% YoY

A leading brokerage firm, Geojit has recently published a report on GAIL (India), a maharana company and recommended 'Buy' the stock of the company for a target price of Rs 156 per share. GAIL is expected to continue delivering positive growth in the near term owing to rising prices, capex prospects and surging demand from the fertilizer plants, refinery and petrochemical expansions. GAIL declared a Final dividend of Rs. 10/share for FY22.

GAIL (India) Stock Outlook

The stock of GAIL (India) on Friday closed at the Current Market Price (CMP) of Rs 137.25 per share, gaining 0.29%. Over the last week, its share price gained nearly 3.7%. However, in the past 3 years, its share price has given negative returns. In 1 year, its price slid 7.7% and 9.14% in 3 years, respectively. It gave a positive return of 1.96% in 5 years.

The stock's 52-week low was recorded on 20 December 2021 at Rs 125.20 per share and 52-week high on 19 April 2022 at Rs 173.50 per share, respectively. The stock PE ratio is 4.97 and the PB ratio is 0.95. Its face value is Rs 10, and its EPS is Rs 27.60. The ROE stood at 19.11%.

If the investor buys the stock of GAIL at the Current market price, considering the estimated target price by the brokerage, investors can expect gains of 14% in 12 months.

Trading gains led the revenue growth

In Q4FY22, standalone revenue went up to 73.4% YoY to Rs. 26,968cr (+4.6% QoQ), owing to higher revenue across natural gas marketing, LPG transmission and trading segment due to increased prices owing to global war tensions which was offset by weak performance in the petrochemicals business. EBITDA went up to Rs. 4,138cr in Q4FY22 (+61.3% YoY, -2.1% QoQ) aided by higher realizations alongside improved operational efficiencies whereas EBITDA margin fell 120bps YoY to 15.3%. Consequently, PAT for the quarter grew 40.6% YoY to Rs. 2,683cr (-18.4% QoQ).

Business Updates

• Estimated capex is ~Rs. 75bn for FY23, the company shall invest in various projects worth ~Rs 300bn, over the next 3 years.
• GAIL has Successfully obtained approval from Competition Commission of India (CCI) for acquiring IL&FS Group's 26% equity in ONGC Tripura Power Company (OTPC) and completed acquisition of IL&FS Group's 26% equity in OTPC on April,1 2022.
• Management has retired high cost loan by exercising call option on Bond Series 2015 which was issued at 8.30% p.a. and an amount of Rs. 500cr has been paid.
• GAIL Board approved buyback of ~5.70cr shares at Rs. 190/share aggregating to ~Rs. 1,083cr in FY 2021-22.

GAIL undertakes Green Energy capacity expansion

GAIL shall invest Rs. 26,000 cr in the renewable's portfolio by 2030 out of which Rs. 6,000 cr will be invested in 3 years, and ~Rs. 20,000 cr by 2030. It is looking forward to 1 GW of renewable capacity over the next 3 years. This shall consolidate to 10% of GAIL's portfolio to be hydrogen plus renewable by 2030 which shall expand portfolio of the company and reap benefits.

Geojit Suggests Buy for a Target Price of Rs 156/share

According to the brokerage, "GAIL shall benefit from the capex prospects, enhanced utilization of Urja Ganga pipeline and expansion of Petrochemical pipelines, which shall aid increased demand and improve profitability. Economic revival along with increased prices and green capacity plant shall act in favor of the company's profit margins. Maintaining a positive outlook, we reiterate our BUY rating on the stock with a rolled forward target price of Rs. 156 based on our SOTP methodology."

About-GAIL (India) Ltd

GAIL (India) Limited is India's leading natural gas company with diversified interests across the natural gas value chain of trading, transmission, LPG production & transmission, LNG re-gasification, petrochemicals, city gas, E&P, etc. It owns and operates a network of around 14,381 km of natural gas pipelines spread across the length and breadth of the country. It is also working concurrently on the execution of multiple pipeline projects to further enhance the spread. GAIL commands ~70% market share in gas transmission and has a Gas trading share of over ~ 50% in India.

Disclaimer

The stock has been picked from the brokerage report of Geojit. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.