GAIL India rallies 5% in weak market; hits 8-month high on heavy volumes

Gas transmission and trading volumes are likely to increase in FY24E with supplies coming from new sources, analysts say

Shares of GAIL India rallied 5 per cent to hit an eight-month high of Rs 103.30 on the BSE in Wednesday’s intra-day trade on the back of heavy volumes. The stock of the state-owned gas transmission/marketing company was quoting at its highest level since June 2022. It had hit a 52-week high of Rs 116 on April 19, 2022.

At 01:24 pm; GAIL India was trading 4.7 per cent higher at Rs 102.65 as compared to a 0.37 per cent decline in the S&P BSE Sensex. The average trading volumes on the counter had doubled with a combined 34.11 million equity shares having changed hands on the NSE and BSE.

GAIL India is a gas utility company with various business segments such as gas transmission & trading, liquefied petroleum gas (LPG), LLH and petrochemicals. It operates a natural gas pipeline network of 14500 km as of end of FY22. The company also has a presence in city gas distribution (CGD) sector directly and via associate companies.

According to a Business Standard report, GAIL India has floated an expression of interest (EoI) to acquire up to 26 per cent equity in a Liquified Natural Gas (LNG) liquefaction plant or project in the United States. The move represents the first attempt by an Indian public sector undertaking to own an energy asset in the US, which remains the third-largest source of LNG for the country. CLICK HERE FOR FULL REPORT

Meanwhile, despite a lower-than-expected Q3 profitability due to weak margins in all segments, analysts have maintained ‘buy’ rating on the stock on positive outlook going ahead.

Gas transmission and trading volumes are likely to increase in FY24E with supplies coming from new sources. Petchem and LPG/LLH performance is expected to improve, going ahead, with a decline in gas prices. We change our rating on the stock from HOLD to BUY, analysts at ICICI Securities said in a Q3FY23 result update.

The pick-up in gas transmission and petchem volume, gas trading is expected to improve with new supply contracts and consistent dividend payout are key triggers for future price performance, the brokerage said.

Availability of 0.5MTPA US LNG volumes along with softening LNG prices of $20/mmbtu and likely higher pipeline tariffs will drive earnings, in our view, analysts at Prabhudas Lilladher said. The brokerage reiterated ‘BUY’ with a target price of Rs 123 (Rs 120 earlier) based on 7x EV/E FY24E.