GAIL India shares rise after Q1 results; Should you buy?
The company reported a decline of 45% in consolidated net profit at ₹1,793 crore for the first quarter of FY24, compared to ₹3,250 crore in the corresponding period last year.
The state-run gas distributor’s revenue from operations in Q1FY24 fell 13% to ₹32,848 crore, compared to ₹37,942 crore in the year-ago period.
Sequentially, GAIL’s net profit surged 179% in the June quarter, from ₹643 crore in the quarter ended March 2023 mainly on account of increased gas marketing and transmission volumes and increased transmission tariff realisation.
Read here: GAIL Q1 Results: Net profit falls 45% to ₹1,793 crore, revenue down 13% YoY
GAIL India’s Q1 results garnered mixed reactions from analysts. Here’s what brokerages have to say on GAIL India Q1 results and the stock:
Nomura
Nomura said that GAIL India’s Q1 results were weak, but the optimistic outlook was already priced in. The rise in gas transmission tariffs and marketing performance was offset by LPG/LHC.
The brokerage has a ‘Neutral’ rating on the stock with a target price of ₹125 per share.
GAIL India’s Q1 EBITDA was below Motilal Oswal’s estimates due to a weak performance in petchem segment. Owing to the underperformance in Q1FY24, Motilal Oswal cut its FY24E EBITDA/PAT estimates by 12% while keeping FY25 estimates broadly unchanged.
The brokerage maintained ‘Buy’ rating on the stock and raised the target price to ₹145 per share.
Kotak Institutional Equities
GAIL’s Q1FY24 EBITDA, while up 8X QoQ, was 22% below the brokerage’s estimates, as one-off costs continued to impact transmission profitability and petchem remained in loss. Petchem reported another loss, and will likely report losses in the near term. LPG/LHC will also likely report loss in Q2, Kotak Institutional Equities said.
It maintained a ‘Reduce’ call and raised the target price to ₹105 per share from ₹95 earlier.
Antique Stock Broking
Antique Stock Broking cut GAIL’s FY24 and FY25 EBITDA estimate by 8% and 3% to incorporate the weakness in the petrochemicals segment. However, GAIL’s pipeline business, from which GAIL derives the most value, has turned around successfully after the implementation of the new pipeline regulations and the new integrated pipeline tariff.
Accordingly, the brokerage firm increased its target multiple for the pipeline business by 0.5x and increased the target price to ₹130 per share from ₹125 earlier, and maintained a ‘Buy’ rating on the company.
Nuvama Institutional Equities
Nuvama Institutional Equities is of the view that GAIL is a diversified play on India’s gas consumption with growth driven by transmission/trading volume growth and higher petchem capacity. Yet, low utilisation of pipeline and weak petchem remain key challenges.
It raised FY25E EBITDA by 3% and retained ‘Hold’ with a target price of ₹122 per share.
GAIL India’s Q1 results were well ahead of ICICI Securities’ estimates. Stronger transmission earnings, buoyed by 8 mmscmd uptick QoQ in volumes, 45% higher tariff QoQ and 2x QoQ improvement in trading EBITDA, helped offset continued weakness in petrochemical and muted LPG earnings, ICICI Securities said.
It believes FY24E is likely to see multiple drivers of outperformance.
It raised FY24 and FY25 EPS estimates by 5.6 and 14% and increased the target price to 149 per share from ₹124 per share. It has maintained a Buy call on the stock.
At 11:45 am, GAIL India share price was trading 1.51% higher at ₹120.80 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 01 Aug 2023, 11:46 AM IST
