Buy This Large Cap Stock With A Target Price of Rs. 208 Says Geojit

Q2FY22 results of GAIL (India)

According to the broking firm Geojit “During Q2FY22, company’s standalone revenue rose 57.7% YoY to Rs. 21,515cr (+23.7% QoQ) as it benefited from strong performance across all its segments, thereby registering significant gains owing to a hike in gas prices in the international markets and higher sales of RLNG within India. Gas demand in the domestic market improved to 114.32 mmscmd (vs. 107.6 mmscmd in Q1FY22), while the production utilization levels improved to 55% (vs. 52%).”

Geojit has reported in its research report that the “Company reported stellar gains in gas transmission business as well, led by higher average price realizations for both Petrochemical (PC) and Liquid Hydrocarbon (LHC), with LPG transmission utilisation rate of 110% for the quarter. Owing to significant physical operational performance, EBITDA recorded a growth of 159.7% (+44.1% QoQ) reaching Rs. 3,475cr, with EBITDA margin improving 640bps YoY to 16.2%. Resultantly, PAT rose 130.9% YoY to Rs. 2,863cr (+87.1% QoQ), further helped by higher other income.”

Key concall highlights of GAIL according to Geojit

• H1FY22 CAPEX stood at Rs. 3,180cr, with FY22 guidance at ~Rs. 6,600cr.
• City gas distribution (CGD) business turned profitable during the quarter, with gas being supplied to 81 CNG stations.
• Company is evaluating plans to set up the country’s largest green hydrogen plant with a 10MW capacity and has identified 2-3 sites for the unit. It has also thereafter floated a tender for an electrolyser for the plant.
• Management remains confident of sustaining EBITDA margin performance in the gas marketing business at current levels in the coming months, as domestic consumption remains on a steady increase. With LNG prices hovering around $30 MMBtu in the international market and set to rise further, GAIL will continue to see better spreads in this segment, thereby translating to higher profitability.

Buy GAIL (India) Limited with a target price of Rs. 208

The brokerage has said that the “Company recently received the first shipment under its long-term deal with Gazprom for LNG, with prices that are cheaper than other deals currently in place with foreign sources. With a good monsoon for the year, demand from fertilizer manufacturers is expected to remain high in the coming months.”

Geojit in its research report has claimed that “With domestic retail demand also on the rise, we expect GAIL to deliver significant performance in the coming quarters. We estimate PAT to grow at 25.3% FY21-23E CAGR and reiterate our BUY rating on the stock with a revised target price of Rs. 208 based on our SOTP valuation.”

Disclaimer

The above stock has been picked from the brokerage report of Geojit Financial Services Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.