Buy GAIL; target of Rs 200: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Gas marketing: GAIL's gas marketing segment delivered a strong quarter, with 2Q PBT at Rs31.5bn, driven by higher returns on the HH portfolio amid elevated crude prices and spot sales.
  • Transmission volumes: Gas transmission volumes recovered sequentially to 130mmscmd, with FY27/FY28 guidance at 126-127/134-135mmscmd.
  • Petchem earnings: Petchem earnings were near breakeven in 2Q, with a similar performance expected for FY27.
  • LPG-LHC earnings: LPG-LHC earnings were weighed down by lower realizations and higher gas costs.

Thesis Validation Checklist

To validate the investment thesis, we will monitor:

  • Gas marketing margins: The sustainability of gas marketing margins, particularly the HH portfolio, amid volatile crude prices.
  • Transmission volume growth: The growth in gas transmission volumes, driven by CGD and refinery segments.
  • Petchem earnings: The improvement in petchem earnings, driven by higher utilization and lower unit opex.
  • LPG-LHC earnings: The recovery in LPG-LHC earnings, driven by higher realizations and lower gas costs.