Nomura has maintained a ‘Buy’ rating for GAIL (India). The brokerage house has raised its target price for GAIL to Rs 195 from Rs 185. This translates to an upside potential of 21% from the current market price.
The government raised domestic gas allocation, the company is seeing petchem recovery, big projects commissioning in FY27, and many other factors contributed to the increase in price target.
Let’s take a look at the key reasons why the brokerage house is bullish on this oil and gas sector stock –
Sharp growth in LPG and LHC EBITDA
Nomura expects the EBITDA for the LPG and Liquid Hydrocarbon (LHC) segment to grow more than four times year-over-year in FY27. This growth is driven by a significant increase in Saudi contract prices for propane and butane (+43% as against pre-war levels) and the impact of INR depreciation.
“We expect GAIL’s earnings not to be significantly dependent on the status of the West Asia war, unlike most other energy stocks under our coverage. Management has guided for a tight 3% band for transmission volume (115-119mmscmd), depending on whether the war is over immediately or drags throughout the year,” added the brokerage house.
Increased domestic gas allocation
To offset the loss of LPG supplies from West Asia, the government has increased GAIL’s APM (Administrative Price Mechanism) gas allocation by 50% (an additional 0.79 mmscmd) for its LPG production segment.
This higher feedstock volume is a major contributor to the improved earnings outlook.
Petchem segment recovery
Despite the high cost of using spot LNG as feedstock due to the unavailability of gas from Qatar, the Petrochemical business is expected to reach EBITDA breakeven.
This is possible because the average selling prices for polymers like HDPE have surged more than 50%.
Reversal of financial one-offs
GAIL’s recent earnings were impacted by a provision of Rs 670 crore related to fertilizer subsidy payments. Nomura expects this provision will be written back in FY27 once payments are received from the government, providing a boost to future reported earnings.
Significant project commissioning in FY27
The coming year is expected to be a major period for project completions, with several large-scale pipelines (such as the Jagdishpur-Haldia and Gurdaspur-Jammu projects) and a 1,250 ktpa Purified Terephthalic Acid (PTA) plant in Mangalore scheduled to come on stream.
GAIL’s share price performance
The share price of GAIL has risen 10% in the last five trading days. The stock has increased 2% in the past one month and has dropped 4% in the last six months. GAIL’s stock price has declined 13% over the previous 12 months.
GAIL Q4FY26
The company’s net profit for the quarter declined 41% year-on-year to Rs 1,481 crore from Rs 2,505 crore recorded in the same quarter a year back.
Its consolidated revenue from operations fell by 2.3% YoY in Q4FY26 to Rs 35,705 crore from Rs 36,549 crore in the same period last year.
Other expenses rose to Rs 3,647 crore in Q4FY26 from Rs 2,220 crore in the same quarter last year. This led to a rise in GAIL’s total expenses, which jumped almost 40% YoY to Rs 34,989 crore for the reporting quarter.
