Gas Authority of India Limited (GAIL) held an analysts meet where most of them visited the company's Vijaipur plant to get an insight into its traditional gas transmission business along with the new projects — Green hydrogen plant and small-scale LNG plant operation.
Following the analysts meet, GAIL has seen a couple of brokerages trimming their price targets and ratings on the stock while others maintaining their calls.
For instance, Nuvama analysts have issued a 'Hold' call on GAIL, setting a target price of ₹151 per share.
Motilal Oswal analysts remain positive on GAIL as the capex cycle unwinds. "The company has continued to explore new avenues for investments such as green hydrogen, SSLNG, and even coal to gas/chemicals. At 11 times FY26 P/E (price-earnings) and the current dividend yield of 2%, we believe valuations remain reasonable," it said while retaining a 'Buy' call on the stock and a target of ₹215 per share.
CLSA's outlook on GAIL is more neutral. They have downgraded the stock to 'Sell' and assigned a target price of ₹165 per share on slow earnings per share (EPS) growth. The foreign brokerage sees limited potential for rerating and anticipates subdued EPS growth, suggesting a cautious stance on GAIL's performance in the near term.
Jefferies also has an 'Underperform' recommendation on the stock with a target price of ₹150. Analysts will keenly watch the company's progress towards target of blending 20% green hydrogen in transmission volume by 2040, the broking firm said.
GAIL: Takeaways from analysts meet
Nuvama Institutional Equities, which attended GAIL (India) Ltd's analyst meet, said GAIL's HVJ pipeline stays within the key national gas grid, which is 60% of the total transmission network. However, the capacity utilization there remains low, which is worrying the analysts.
The broking firm also said that GAIL is setting up a green hydrogen plant with capacity of 4.3 tones per day at a capex of ₹230 crore. This would mean the cost of Green hydrogen could be $2.5 per kg, making it comparable to grey hydrogen.
GAIL has also begun blending 2% hydrogen with CNG and 5% with PNG on a pilot basis and is in the process of setting up its first LNG dispensing station at Vijaipur.
"GAIL is a diversified play on India's gas consumption with growth driven by gas transmission, trading volume growth and high petchem capacity. However, low utilisation of pipeline and cyclical nature of the petchem business remain key challenges," Nuvama said in its latest note to clients.
But despite the challenges, initiatives towards becoming net zero by 2040 led by hydrogen blending, green hydrogen production, setting up CBG plant and LNG dispensing stations provide it an edge, the brokerage added.
The year 2023 turned out to be the best year for GAIL's shares since 2009 as the stock stepped on the gas, delivering returns of about 70%.
The PSU stock has gained 10% so far in 2024. At 12:23 pm, the stock was quoting at ₹183.40 on the NSE, down by 2.73% from previous close.
First Published: Mar 11, 2024 12:31 PM IST
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