Brokerages lower GAIL target on weak Q3; long-term positive outlook intact

State-owned natural gas transmission company GAIL posted a weak consolidated operational performance in Q3FY25. The company’s performance was affected by a combination of factors, including a decline in gas marketing profitability, lower LPG volumes due to APM gas de-allocation, and weaker-than-expected petchem earnings. 

 

However, GAIL continues to be well-positioned in the long-term due to strong fundamentals, such as a healthy outlook for gas demand in India, growth in gas transmission volumes, and the commissioning of ongoing petchem projects. 

 

Moreover, there are potential upsides from the inclusion of natural gas under GST, which could drive gas volume growth and lower operational costs.

 

Despite recent challenges, GAIL’s outlook remains positive, supported by a robust pipeline of growth opportunities in gas transmission, rising demand from CGD networks, and new LNG supply contracts. 

 

Overall, GAIL reported a 6.2 per cent increase in revenue at Rs 36,937.1 crore, up from Rs 34,767.8 crores in Q3FY23. PAT attributable equity holders of the parent surged 27.9 per cent annually to Rs 4,084.2 crore, from Rs 3,193.3 crore a year ago.

 

Sandeep Kumar Gupta, chairman and MD, GAIL informed that in Q3FY25, GAIL has accounted for an exceptional income of Rs 2,440 crore from SEFE Marketing & Trading Singapore Pte. Ltd as settlement towards withdrawal of arbitration proceedings.   ALSO READ: ITC Hotels trades weak in firm market; stock down 15% from listing day high

 

For the quarter, the average Natural Gas Transmission volume was 125.93 MMSCMD, slightly down from 130.63 MMSCMD in Q2FY25. Gas marketing volumes increased to 103.46 MMSCMD from 96.60 MMSCMD in the previous quarter. LHC sales rose to 282 TMT from 253 TMT, while Polymer sales decreased slightly to 221 TMT from 226 TMT.

 

GAIL also declared an interim dividend Rs 6.50 per share for FY25.

 

On the bourses, GAIL share price rallied as much as 7.03 per cent to hit an intraday high of Rs 178.75 apiece.

 

However, analysts remain divided in their assessments, with some maintaining a ‘Buy’ rating based on GAIL’s strong long-term growth prospects and attractive valuations, while others have reduced targets due to concerns over shrinking marketing margins and subdued earnings from certain segments. 

 

Given this, here’s what top brokerages said about GAIL post-Q3 results:

 

Nomura | Buy | Target: Rs 235 (Rs 267 earlier)

 

GAIL’s Q3 Ebitda dropped 24 per cent Q-o-Q, missing estimates by 19 per cent, mainly due to lower profitability in gas marketing, petchem, and lower gas transmission volumes. Net income (adjusted) fell 47 per cent Q-o-Q and was 40 per cent below estimates.Thus, Nomura analysts cut its FY25-27 Ebitda estimates by 9 per cent-7 per cent. Despite this, they maintained a Buy rating, citing strong growth potential from India’s rising gas demand, higher transmission tariffs, and potential benefits from including natural gas under GST. They project a 13.5 per cent 2-year Ebitda CAGR.

 

Elara Capital | Buy | Target: Rs 234 (Rs 263 earlier)

 

Elara noted GAIL's stock fell 18 per cent over the past three months, impacted by lower gas marketing margins and reduced APM gas allocation. They lowered their target price to Rs 234 (from Rs 263) but retained a Buy rating, driven by strong transmission volume growth (9 per cent CAGR) and opportunities in gas marketing. However, they trimmed FY26-27 EPS by 3 per cent-2 per cent, factoring in lower gas margins and subdued earnings from LPG and LHC segments.  ALSO READ: Ola Electric soars 14% after launching 8 new Gen 3 variants of S1 portfolio

 

InCred Equities | Add | Target: Rs 261

 

InCred highlighted GAIL’s record quarterly PBT and PAT, driven by high gas marketing volumes and a one-time arbitration settlement. They expect continued growth from new demand centres, pipeline expansions, and secured LNG contracts. The target price is Rs 261, based on strong gas marketing volume growth and ongoing pipeline projects.

 

Nuvama | Buy | Target: Rs 159

 

Nuvama had downgraded its outlook on GAIL following Q1FY25 earnings, citing lofty valuations and unsustainable high earnings from its Natural Gas (NG) marketing. The stock has already fallen 31 per cent, with further downside expected, analysts said.

 

The Management has revised its FY26 natural gas marketing Ebitda guidance down to Rs 4500 crore from Rs 5,000 crore. Given this, analysts have cut their FY26E/27E EPS estimates by 12 per cent each, leading to a target price of Rs 159 and maintaining a ‘Reduce’ rating.