Maharatna PSU oil and gas giant, GAIL (India) rallied by as much as 6.9% to hit an intraday high of Rs 209.95 apiece on November 6, 2024, amidst a bull market and after its Q2 results for FY25 were announced. In the quarter, GAIL's earnings were a miss due to the normalisation of the gas trading margin. Despite this, brokerage JM Financial has recommended BUY on GAIL stock.
GAIL Share Price:
After market hours, GAIL stock ended at Rs 208.90 apiece, up by 6.4% on BSE, with a market cap of Rs 1,37,353.83 crore. The stock's 52-week high and low is at Rs 246.35 apiece and Rs 122.90 apiece respectively. Its return on equity is around 16.23% which is strong.
YTD, the stock zoomed by nearly 26% on BSE.
GAIL is among the leading PSU stocks that pay hefty dividends. As per Trendlyne data, GAIL has paid up to 47 dividends since September 2001. GAIL is also among the highest bonus issue distributors to its investors.
Noteworthily, the natural gas producer has a long track record of rewarding bonus shares. The first time, GAIL turned ex-bonus was on October 6, 2008, for its bonus issue in the ratio of 1:2. After nearly a decade, GAIL rewarded two back-to-back bonus shares of 1:3 each in March 2017 and March 2018. Later on, the company also paid bonus shares in the ratio of 1:1 in July 2019. The latest bonus issue is of 1:2 which was in September 2022.
GAIL India Q2 Results:
In Q2FY25, the company reported revenue from operations of Rs 32,931 crore, as against Rs 33,692 crore in Q1 FY-25. PAT stood at Rs 2,672 crore in Q2 FY-25 as against Rs 2,724 crore in Q1 FY-25.
Also, in the quarter, the company stated its Natural Gas transmission volume stood at 130.63 MMSCMD in Q2 FY-25 & Gas marketing volume was 96.60 MMSCMD in Q2 FY'25. The LHC & Polymer sales stood at 253 TMT & 226 TMT respectively in Q2 FY-25 as compared to 218 TMT & 169 TMT respectively in Q1 FY-25.
Further, the company posted Revenue from Operations of Rs 66,622 crore for the period April - September 2024 as compared to Rs 64,050 crore in the corresponding period of Financial Year 2023-24. Profit after Tax (PAT) stood at Rs 5,396 crore in H1 FY25 as compared to Rs 3,817 crore in the corresponding period of the previous year. GAIL has witnessed its highest-ever half-yearly EBITDA, PBT & PAT in H1 FY'2025.
BUY GAIL Stock:
Talking about the financial performance, JM Financial in its note said, GAIL's 2QFY25 standalone EBITDA was lower at INR 37.5bn vs. JMFe/consensus of INR 42.2bn/ INR 40.3bn primarily due to lower-than-expected EBITDA from the gas trading .segment; it was also partly driven by slightly lower gas transmission EBITDA. Petchem segment EBITDA was largely in line as marginally lower sales volume was offset by a robust margin.
Also, it highlighted that the company's LPG & OHC segment EBITDA was also largely in line with slightly higher sales volume offsetting marginally lower margin. LPG pipeline segment EBITDA was steady as expected.
On the valuation, JM's note said, "We maintain our FY25-FY27 estimates; however, our TP has been revised to INR 250 (from INR 255) due to decline in value of other investments (which is valued at CMP less 20% holding discount). We reiterate BUY due to steady growth visibility in the gas transmission business, coupled with the higher tariff, on account of 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)."
JM's target price on GAIL comprised of a) core business value of INR 208/share; b) other investments at INR 53/share; and c) net debt of INR 11/share. Among key risks for the stock are - a) sharp weakness in crude/spot LNG and/or jump in US HH gas price posing risk to US LNG margin; b) slow recovery in domestic gas demand impacting volume for gas transmission and trading segment.
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