1:2 Bonus Issue, 95% Dividend: BUY Maharatna PSU Oil Stock GAIL After Q1, Highest Target Rs 250 By Brokers

GAIL India, a Maharatna PSU oil and gas company, witnessed heavy buying after reporting strong earnings in the June 2024 quarter. On July 31, the stock touched a new 52-week high of Rs 246.35 apiece on BSE. Brokerages like JM Financial and Citi have recommended BUY with an outlook positive. The highest target price is at Rs 250 in the short term.

GAIL share price:

After market hours of July 31, GAIL stock price ended at Rs 241.05 apiece, up by 3.2% on BSE. Its market cap is Rs 1,58,492.78 crore. The large-cap also touched a new 52-week high of Rs 246.35 apiece.

YTD, GAIL stock has rallied by nearly 45%.

In less than 3 years, GAIL has delivered a 1:2 bonus issue and up to 95% dividend payout.

GAIL first turned ex-bonus in September 2022, for distributing 1 bonus share against two existing equities. While the stock has delivered two interim dividends since last year. It paid up to 40% or Rs 4 dividend per share for which it turned ex-dividend on March 21, 2023, which is followed by another dividend payout of Rs 5.50 per share or 50% for the ex-dividend date on February 6, 2024.

GAIL Q1 Results:

The company reported Revenue from Operations of Rs 33,692 crore in Q1 FY-25 as against Rs 32,227 crore in Q1 FY-24. Profit after Tax (PAT) in Q1 FY-25 stood at Rs 2,724 crore as against Rs 1,412 crore in Q1 FY-24.

On a Consolidated basis, Revenue from Operations stood at Rs 34,822 crore in Q1 FY-25 as against Rs 32,833 crore during Q4 FY-24. PBT in Q1 FY-25 stood at Rs 4,114 crore as against Rs 3,099 crore in Q4 FY-24. PAT (excluding Non-controlling interest) was Rs 3,183 crore in Q1 FY-25 as against Rs 2,469 crore in Q4 FY-24.

Sandeep Kumar Gupta, Chairman & Managing Director, GAIL said that the Company has incurred a Capex of about Rs 1,659 crore during the current quarter, mainly on Pipelines, Petrochemicals, Equity to JVs, etc. which is about 21% of the annual target of Rs 8,044 crore.

He further stated that GAIL has advanced its Net Zero carbon target for scope-1 and scope-2 emissions to 2035 from earlier 2040.

BUY GAIL Share Price:

Global brokerage CITI has maintained a buy on GAIL for a target price of Rs 250 per share. The outlook is positive as well.

Meanwhile, JM Financial in its report stated that GAIL's 1QFY25 standalone EBITDA, at INR 45.3bn, was significantly higher vs. JMFe/consensus of INR 36.2bn/ INR 37.4bn due to stronger-than-expected EBITDA from a) gas trading segment driven by the very strong margin; and b) gas transmission segment on account of lower gas cost and higher volume. However, petchem segment earnings were weaker than expected on lower volume and negative operating leverage; while LPG & OHC segment EBITDA was largely in line.

Further, JM's note added, "We maintain BUY (revised TP of INR 250) on steady growth visibility in the gas transmission business on account of higher tariff and various policy tailwinds (given the government's target to increase the share of gas in India's energy mix to ~15% by 2030 vs. ~7% currently)."