Motilal Oswal highlights this PSU as its top pick for 2024

Rising transmission volumes and a turnaround in the petrochemicals business is likely to aid GAIL's Return on Equity (RoE) to improve to nearly 15% in financial year 2026 from the financial year 2023 low of 9.5%, the note said, adding that the petrochemical segment is likely to become profitable at the EBIT level by financial year 2026, driven by improvement in PE prices, petchem demand and softer spot LNG prices.

RoE, also considered Return on Net Assets, is a financial ratio that shows how well a company is managing the capital that shareholders have invested in it. To calculate RoE, one needs to divide the company's net income by the shareholders' equity.

Motilal Oswal expects a combination of the upcoming gas price-related tariff hikes, a 32% Compounded Annual Growth Rate (CAGR) in the company's EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) and the onset of new projects will drive a re-rating for GAIL going forward.

The brokerage values the core business at 12 times December 2025 adjusted Earnings Per Share (EPS) estimates of ₹13.7. It is also adding the value of listed and unlisted investments at ₹30 per share.

Shares of GAIL have risen 63% in 2023, making it the best calendar year performance for the gas utility stock since 2009, during which the stock had doubled. Out of the 32 analysts that track GAIL, 25 of them have a "buy" recommendation, four say "hold", while three have a "sell" rating.