GAIL Shares Surge Over 4%, Reach 52-Week High Amidst Brighter Earnings Prospects and Increased Gas Demand

GAIL Shares Surge Over 4%, Reach 52-Week High Amidst Brighter Earnings Prospects and Increased Gas Demand

VoM News Desk | January 1, 2024 | 12:51 PM IST | Breaking News | Follow on Google News

GAIL Shares Surge Over 4%, Reach 52-Week High Amidst Brighter Earnings Prospects and Increased Gas Demand

GAIL Shares Surge Over 4%, Reach 52-Week High Amidst Brighter Earnings Prospects and Increased Gas Demand

GAIL (India) Ltd witnessed a surge of over 4%, reaching a 52-week high on Monday, marking an impressive gain of over 50% in the last six months, predominantly propelled by an improved earnings outlook. The company, being India’s largest gas pipeline operator, stands to benefit significantly from the plummeting international gas prices and robust gas demand within the country.

Analysts at Motilal Oswal Financial Services anticipate substantial growth, projecting transmission volumes to expand to 140mmscmd by FY26, reflecting a 9% CAGR during FY23-26. The country’s rising gas production and the commissioning of new fertiliser capacities are anticipated to further boost gas demand, supporting GAIL’s growth trajectory.

The augmentation of LNG regasification capacity, with five new terminals becoming operational, contributes to the escalating gas consumption in India. Despite recent volatility due to geopolitical tensions, LNG prices have significantly softened from their highs, attributed partly to the imminent addition of substantial liquefaction capacity, especially in the US and Qatar, expected between CY24-26. Lower LNG prices bode well for increased gas demand, as projected by analysts.

With transmission EBITDA likely to constitute 46% of total EBITDA in FY26, up from 40% in FY23, GAIL’s earnings stability is expected to improve significantly. Despite challenges in the petrochemical industry due to heightened supplies, recent trends of moderated capacity additions and growing demand signal a gradual improvement in the segment’s profitability.

Analysts foresee tariff revisions and escalating volumes as catalysts for GAIL’s earnings growth. They expect GAIL’s ROE (Return on Equity) to rise to 15% by FY26 from a low of 9.5% in FY23, driven by the combination of gas price-related tariff hikes, a robust EBITDA CAGR of 32% over FY23-26, and the commencement of new projects. The anticipation of these positive drivers could trigger a re-rating, as suggested by analysts at MOFSL.

VoM News Desk

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