Motilal Oswal has joined Prabhudas Lilladher and Nomura in issuing buy ratings on GAIL India with target prices of ₹206 and ₹195 respectively, as reported in research reports dated August 01, August 02, and latest reports. The triple brokerage support reflects strong confidence in GAIL's operational performance and attractive valuations. Motilal Oswal's research highlights that GAIL's valuations have corrected sharply from their September 2024 highs and now trade close to historical averages at approximately 1x one-year forward core P/B (ex-investment value), offering limited downside with attractive dividend yield and robust free cash flow outlook.
Nomura has maintained its 'Buy' rating on GAIL India with a target price of ₹195 after the company delivered exceptional first quarter results that significantly exceeded expectations across all business segments. Macquarie has maintained its 'Outperform' rating with a target price of ₹205, implying an upside of about 16.6%, as the brokerage noted that GAIL delivered a strong June quarter with earnings comfortably ahead of expectations, led by gas marketing and transmission. Motilal Oswal's analysis confirms that GAIL's standalone EBITDA came in 86% above their estimate at ₹63.8 billion, with the beat largely attributed to strong performance in natural gas trading and LPG & liquid hydrocarbon segments.
According to Nomura's analysis, GAIL's adjusted EBITDA of ₹6,380 crore came in 250% quarter-on-quarter and 156% above their estimate, with the brokerage noting that the numbers were ahead of expectations across all business segments. Macquarie noted that the gas marketing business benefited from favourable pricing dynamics during the quarter, though it expects those extraordinary gains to soften in subsequent quarters as commodity spreads normalise. Motilal Oswal's research confirms that reported PAT stood significantly above their estimate at ₹42.9 billion (estimate: ₹20.7 billion), as other income came above their estimates. The strong performance was primarily driven by a sharp rebound in Trading EBIT on higher temporary basis spreads, with management maintaining FY27 Marketing PBT guidance at ₹45 billion, supported by temporary basis gains, though future profitability will depend on Dated Brent prices.
As reported by Prabhudas Lilladher, GAIL raised FY27 Transmission volume guidance to 123mmscmd from the previous 119mmscmd, following improved volume performance in Q1FY27. Nomura highlighted that gas transmission volumes stood at 122.4 million standard cubic metres per day (mmscmd) in Q1FY27, up 3% quarter-on-quarter and 7% above their estimate, supporting the enhanced guidance. Macquarie noted that the transmission business continues to improve, with the brokerage expecting expanding pipeline utilisation and improving gas demand from city gas distribution, industries and power to support earnings over the coming years. The company also expects its Petrochemical business to achieve breakeven in FY27, with the plant now operating at full capacity compared with around 23% in Q1.
Motilal Oswal's latest research highlights India's natural gas demand is poised to enter a structurally stronger growth phase, with consumption likely to accelerate to 5-6% CAGR over FY26-31 (vs. 3.2% over FY16-26). The acceleration will be driven by three key factors: (1) ~20mmscmd of incremental gas demand from 8-9 new urea plants to be set up under the government's NIPU-2026 policy (additional ~2.5mmscmd from the 1.27mmtpa Namrup-IV urea project by FY29), (2) ~28mmscmd of incremental CGD demand (assuming 10% CAGR over FY26-31), and (3) ~20mmscmd of incremental demand from refinery and petrochemical expansions. Motilal Oswal estimates a 27% CAGR in PAT over FY26-28, driven by increased natural gas transmission volumes to 127mmscmd in FY28E from 122mmscmd in FY26. The brokerage believes this structural demand uptrend should support sustainable growth in GAIL's transmission and gas marketing volumes over the medium term.
