Buy GAIL India; target of Rs 206: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Transmission volume growth: Increased gas consumption across power, fertilizer, and petrochemical sectors drove a 6.3% QoQ increase in transmission volume to 130.1mmscmd.
  • Trading profitability: Resilient trading performance and a turnaround in petchem profitability supported higher-than-expected EBITDA.
  • Petrochemicals breakeven: The petchem segment is expected to remain around breakeven in FY27, with gas sourcing costs and realizations supporting this outlook.
  • GAIL Gas listing: The proposed listing of GAIL Gas Ltd, with a 25% equity dilution, is expected to unlock value.

Thesis Validation Checklist

  • Transmission volume growth: Watch for sustained growth in transmission volumes, particularly the guidance of 126-127mmscmd in FY27 and 134-135mmscmd in FY28.
  • Trading profitability: Monitor the sustainability of trading gains, which are expected to moderate in H2FY27.
  • Petrochemicals performance: Track the petchem segment's ability to maintain breakeven performance, influenced by gas costs and realizations.
  • GAIL Gas listing progress: Follow the progress of the GAIL Gas Ltd listing and its impact on the parent company's valuation.