GAIL reported in-line results with EBITDA of Rs32bn (-10% YoY, +13% QoQ, Ple Rs31.2bn, consensus Rs30.5bn) PAT came in at Rs20.5bn (-6% YoY, Ple Rs19.6bn, consensus Rs20.3bn) Previous quarter had an exceptional gain of Rs24bn. For the year, adj PAT stood at Rs88.7bn, flat YoY. We expect steady growth in transmission volume from 127mmscmd in FY25 to 139mmscmd in FY26 and to 149mmscmd in FY27. However, trading segment’s EBIT is expected to normalize to Rs51bn from Rs74.5bn in FY25. Tariff hike of integrated network is expected in few days. This could provide one-time boost. Post that, we do not see any near-term triggers. The stock trades at 11x FY27 EPS. We value the company at 11x adj standalone eps of FY27 and add Rs33 for investments at 25% holding company discount. With target price of Rs191 (previously Rs185), we downgrade the stock to Hold from Accumulate.
- Transmission volume declines sequentially: Transmission volume fell from 126mmscmd in Q3FY25 to 121mmscmd in Q4FY25. For the full year, vol stood at 127mmscmd. We expect transmission volume to rise to 139mmscmd in FY26 and to 149mmscmd in FY27. The regulatory board has called for a public consultation on tariff hike of the integrated pipeline of GAIL. While GAIL has proposed tariff of Rs77.4/mmBtu against existing Rs58.6/mmBtu, Rs7-10/mmBtu is easily achievable, which would provide a one-time boost to the stock.
- Trading EBIT normalizes: Trading segment included one-time gain of USD285mn in the previous quarter. In Q4FY25, trading segment EBIT normalized to Rs12bn, -13% YoY. On an annual basis, we expect EBIT of Rs45bn annually in the next two years.
- Concall highlights: 1) Successful completion of Dabhol breakwater facility; final permission awaited post which it would operate in monsoon also, 2) GAIL operates 72 GAs- directly in 6 GAs- early stages of development with +25% YoY vol growth- to be transferred to subsidiary, 3) Tariff revision of integrated network expected in Q1FY26, 4) Indian gas consumption is expected to reach 290mmscmd by 2030, CGDs rising 2.5-3x, 5) GAIL intends to source 5-7mmtpa LNG by 2030, 6) Trading EBIT band expected at ~Rs45bn, 7) Transmission vol at 138-139mmscmd in FY26, 8) Capex guidance in FY26 of Rs100bn- largely on petrochem and pipeline – Rs30bn each, Rs10bn net zero, maint Rs15-16bn, 9) QoQ decline in transmission was due to partial shifting of gas to GIGL, unplanned shutdown and lower vol transmission by IOCL & BPCL, 10) trading vol at 108/114mmscmd in FY26/27, 11) Last yr 21 cargoes were handled at Dabhol, this yr 34-36 cargoes are planned