GAIL reported good quarterly numbers that surprised the markets. The stock has fallen drastically from 52-week highs of Rs 157.
Brokerage firm, Motilal Oswal has a "buy" rating on the stock, with a target price of Rs 155, which is almost a 50 per cent upside from the current levels of Rs 102.
"GAIL reported higher-than-estimated EBITDA led by better performance of the gas trading and LPG HC business. With revival in crude oil prices, we believe these two segments will remain lucrative for the company in the coming quarter.
Gas sales in April reduced to 70% of normal levels; however, now it has reached 90 per cent of normal levels, barring CNG (which is 50% of normal levels). We expect full normalization in two months," Motilal Oswal has said in its report.
According to GAIL's guidance, due to commencement of the three fertilizer plants on the Jagdishpur-Haldia pipeline, most US HH contracts would be sold within India. Along with the de-risking of US HH contracts, the company has strong tailwinds like boost in transmission volumes from increased domestic gas production, upcoming LNG terminals and NGT's increasing impetus on curbing air pollution.
"We continue to believe that the above guidance would aid GAIL clock strong performance and reiterate our Buy with target price of Rs 155 per share.
Also, trading at a 35% discount to long-term 1-year forward P/E of 14.0 times, GAIL offers an excellent investment opportunity," the brokerage firm has noted.