Fueled by gas
Our BUY recommendation for GAIL with a target price of INR 260 is based on (1) an increase in gas transmission volume to 144mmscmd by FY26E (two-year CAGR of 9%), supported by completion of major pipelines in eastern and southern India and stabilising LNG prices, (2) continued robust profitability in the gas trading segment, and (3) expectation of improvement in earnings from the petchem segment. At the current price, GAIL is trading at 11.6x Mar-26E EPS, only 1% premium to its five-year average despite the stronger volume growth outlook in its core business of gas transmission. Adjusting for the value of its investments, we estimate the GAIL stock is trading at an inexpensive 8.8X FY26E earnings. We reiterate our BUY rating on GAIL with a revised target price of INR 260/sh.
