Buy GAIL; target of Rs 200: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Gas transmission volumes are expected to grow, driven by power and fertilizer sector consumption, with FY27 guidance upgraded to 126-127mmscmd.
  • Gas marketing segment is expected to benefit from favorable JCC-linked gas prices and spot LNG prices, with FY27 PBT guidance of INR90-95b.
  • Petrochemicals segment has turned positive, supported by a favorable gas sourcing mix, with the PDH/PP plant expected to be commissioned in FY28.

Thesis Validation Checklist

  • Transmission volume growth: Monitor progress towards achieving FY27 guidance of 126-127mmscmd.
  • Gas marketing profitability: Track the impact of spot LNG prices and JCC-linked gas prices on marketing margins.
  • Petrochemicals segment performance: Watch for signs of sustained profitability and progress on the PDH/PP plant commissioning. The current valuation of GAIL, trading at ~1x one-year forward core P/B, offers a limited downside, driven by attractive dividend yield and robust FCF outlook.