GAIL (India) Ltd, whose shares are up 100 per cent in the past one year, reported a beat on Q1 earnings, led by a sharp rise in transmission volumes and higher trading profits. While analysts upgraded GAIL's FY25-FY26 earnings estimates by up to 10 per cent, many of them felt the prevailing lofty valuations capture in most positives.
Nuvama downgraded the stock citing lofty valuations. It believes elevated natural gas marketing earnings are unsustainable given historical volatility; contracting spreads between regional spot LNG and Henry Hub, and contraction of spreads between Brent-linked contracted LNG and Henry Hub-linked contracted LNG due to lower global crude demand growth.
"Valuations have outpaced expected growth, making risk-reward unattractive. We are raising FY25E/26E Ebitda by 10 per cent/1 per cent on natural gas transmission & marketing growth; this along with a roll forward to Sep-26 and MTM (mark-to-market) value of investments lifts the target price by 22 per cent to Rs 213. We are cutting target marketing EV/Ebitda to 4x (from 4.5x) and raising transmission multiple to 7x (from 6.5x)," it said.
GAIL shares were trading at Rs 241.50 on BSE, up 0.19 per cent. Antique Stock Broking said the current elevated earnings in the pipeline segment will have to be offset as observed in GSPL's recent tariff order. Given the strong Q1 numbers and favorable price environment in the marketing segment, it increased its FY25, FY26 and FY27 Ebitda estimates by 2-7 per cent.
"We also mark-to-market the value of investments and consequently increase our target price to Rs 196 share against Rs 185 earlier) based on 6.4 times 1HFY27. We maintain 'Sell', as we see limited upside from hereon post the recent stock run-up," it said.
Emkay Global hiked its FY25-26 EPS estimates by 6-8 per cent each, mainly on higher gas transmission and marketing income. It raised its September 2025 target price by 23 per cent to Rs 270 per share, valuing GAIL at 7.5 times Sep-26E EV/Ebitda, on further upgrade potential.
Systematix Institutional Equities raised its GAIL target price to Rs 230 from Rs 202 earlier. It suggested a 'Hold' rating on the stock. ICICI Securities, meanwhile, has a 'Buy' rating on GAIL and a target price of Rs 275 on the stock.