GAIL Gets a Buy from Motilal Oswal, Potential Upside Of Nearly 39%

Motilal Oswal has asked investors to buy shares of GAIL India Limited, India's leading natural gas company. The brokerage feels that share price of the company will fetch returns of nearly 39% if invested, it will reach a target price of Rs 147 per share.

GAIL India Limited is a leading natural gas petroleum provider under the government of India. It is a central public sector undertaking headquartered in New Delhi. It is large cap (bluechip) company having a Maharatna status conferred to it. The company has a market capitalisation of Rs 69,071.42 crore.

The Petroleum and Natural Gas Regulatory Board recently approved a levelized tariff of Rs 58.6/mmBtu for GAIL's integrated natural gas pipeline (INGPL), that would be made effective from April 1, 2023, after the company had proposed an integrated tariff of Rs 68/mmBtu v/s ~ Rs 43/mmBtu realized during 9MFY23.

Recently even the prices of liquified natural gas have fallen to approximately USD12/mmBtu from the peak of USD54/mmBtu. Additionally GAIL India has even signed a memorandum of understanding (MOU) with Shell Energy India to explore prospects for importing important petrochemical precursors in a bid to diversify feedstock for its petrochemical plant.

According to the brokerage, "the decline in LNG prices is a boon for GAIL. We expect its transmission volume to rise to 117mmscmd in FY24 from 107mmscmd in FY23. We also understand that the petrochemical plant has already been ramped up to full utilization a few days back. As a result of the tariff hike, we increase our EBITDA estimate (excluding other income) for FY24 to Rs134 billion from Rs 116 billion previously. Similarly, we raise our FY24 EPS estimate by 16% to Rs 14.4 from Rs 12.4 previously. We value the company at 9x adjusted FY25E EPS and add the value of investments to arrive at a TP of INR147. We maintain BUY on the stock."

The current market price of stock of large cap company is Rs 105.05 per share, it has fallen by 0.38% over previous day's closing. In last one year it has gone up by 7.14% and in three years it has gone up 101.67%. Its 52-week high is at Rs 115.69 per share and 52-week low is at Rs 83 per share.

Disclaimer:

The stock has been picked from the brokerage report of Motilal Oswal, Greynium Information Technologies and 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 consult with certified experts before making any investment decision.