GAIL share price rises 72% in a year. Should you Buy, Sell or Hold the stock?

GAIL (India) Ltd share price has seen strong run up during last one -year having gained almost 72%, and is trading near 52-week highs seen recently. The gains have been driven by improved earnings prospects, led by uptick in gas trading and marketing business, though petchem segment prospects have remained a mixed bag. The dividend yield is another positive for investors.

Focus of analysts however remains on two projects that company has under taken and highlighted  recently. First pertaining to green Hydrogen production and blending to reduce  carbon emission. The second being for improving availability of gas in the underpenetrated areas. 

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The green hydrogen project is looked at in positive light. Analysts at Numama Institutional Equities said that , GAIL's initiatives towards becoming net zero by 2040 led by hydrogen blending, Green H2 production, setting up CBG plant and LNG dispensing stations provide it an edge.

GAIL efforts in pushing gas supplies and improving penetration in the underpenetrated areas also remains positive for earnings. GAIL already is benefitting from strong gas demand in the country. The improved geographical reach penetration by City Gas distribution companies will help improve overall pipeline volumes of GAIL too. Not surprising the same keep analysts positive.

Analysts at Antique Stock Broking have said that “GAIL’s pipeline business remains strong and is expected to improve further as gas power plants may drive growth”.

Even analysts expect improved performance in the petchem segment that has been lumpy.

Analysts at Motilal Oswal Financial Services in  their recent report have said that "during FY24-26 estimated, they are modeling Ebitda to report a 14% CAGR, driven by rising natural gas transmission volumes to 141mmscmd in FY26 from 121mmscmd in FY24 and improvement in petchem segment profitability from second half of FY25 as well as start of service for 560 ktpa of petchem capacity and 3,892 km of gas transmission pipes..

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Analysts at JM Financial Institutional Research also have raised FY25–26 EBITDA estimate by 11–14%, mostly because of the ongoing strength in gas trading Ebitda, which grew to ₹52–55 billion per annum in FY25–26 from ₹41–42 billion earlier, helped by a decline in US Henry Hub (HH) gas prices, and an increase in our Brent crude price assumption to $ 70 a barrel (from $ 65 a barrel earlier).

While Motilal Oswal and JM Financial analysts have buy ratings, those at Antique Stock Broking ana Nuvama have Hold ratings.  Those cautious on GAIL are watchful on cyclicality in Petchem business and falling LNG prices, which can lead to lower offtake and placement of  higher priced take or pay contracts.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

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