ICICI Securities Estimates 31% Potential Upside In Large Cap Maharatna Stock, Buy

ICICI Securities has assigned buy call to large cap maharatna stock, GAIL (INDIA) Ltd with a target price of Rs 127 apiece. If you buy GAIL (INDIA) Ltd now, you will get a potential upside of 31%. The company has a market capitalisation of Rs 63,942 crore. Check key details below:

1. GAIL (INDIA) Ltd Share Performance & Return

The current market price of the stock is Rs 97 apiece with an intraday decline of 0.26%. The stock's 52-week high is Rs 115 apiece and 52-week low is Rs 83 apiece, respectively. The stock has given 22% return in last 3-years, 16% return in last 1-year, and 7% in last 3-months. The stock has declined 22% in last 5-years.

2. Regulatory Environment Has Improved

In recent months, PNGRB has moved ahead on long-pending issues with respect to tariff and capex inclusions. A longer ramp-up for volumes (10 years vs 5 earlier), inclusion of 'system use gas' (SUG) @0.1%, 5-year exemption for capacity expansion from new gas sources and prospective tax rate will all be material positives for overall tariffs.

Also, introduction of integrated tariffs will ease the pressure on customers at the farthest end of the network as they have to pay the cascading tariffs currently of all the pipelines that are used to transport the gas to them.

3. Gas Trading And Petrochemical To Remain Under Pressure

Thanks to the disruption in Gazprom supply, GAIL is backstopping the supply gap by diverting all its cargoes to India. Resultant, it does not have any spare cargoes to leverage the spot LNG vs US HH differentials.

Additionally, it has also cut the gas supply to its own petrochemical units at Pata and hence, utilisation of the same has reduced to ~40% and is likely to stay there for the next 6-9 months.

The LPG segment remains relatively in good shape, and the imminent reduction of APM gas prices as per Kirit Parikh Committee should help ease margin pressures over FY24E.

4. Valuation

According to ICICI Securities, "We revise FY23/24E EPS down by 10/9% respectively, to factor i) lower trading margins, ii) lower petrochemical volumes and iii) lower transmission volumes. This is offset partially by 5% higher transmission tariffs assumed for FY24e onwards, albeit there is an upside risk to this estimate. Reiterate BUY with a revised TP of Rs127 (earlier TP 137)."

5. About GAIL (India) Limited

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.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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.