Broker's call: GAIL India (Buy)

| Updated on: Nov 10, 2021
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Geojit Financial

GAIL India (Buy)

Target: ₹208

CMP: ₹152.1

GAIL India’s stand-alone revenue rose 57.7 per cent y-o-y (+23.7 per cent q-o-q) to ₹21,515 crore in Q2-FY22, aided by strong growth across all segments. EBITDA margin rose 640 bps y-o-y to 16.2 per cent, aided by steady growth in gas prices leading to improved spreads along with better prices and higher operational efficiencies in the petrochemicals business. As a result, reported PAT surged 130.9 per cent y-o-y (+87.1 per cent q-o-q).

The company has received its first LNG shipment from Russian firm Gazprom recently under its 20-year long-term contract at prices set to be cheaper than other foreign sources of gas for the country.

Management remains confident of sustaining EBITDA margin performance in the gas marketing business at current levels in the coming months, as domestic consumption remains on a steady increase.

Profitability is set to improve further with GAIL set to continue to benefit from a hike in gas prices over the short term. With a good monsoon for the year, demand from fertiliser manufacturers is expected to remain high in the coming months. With domestic retail demand also on the rise, we expect GAIL to deliver significant performance in the coming quarters. We estimate PAT to grow at 25.3 per cent FY21-23 CAGR. We reiterate our Buy rating on the stock with a revised target price of ₹208 based on SOTP.

Published on November 10, 2021

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