GAIL (India) Ltd has experienced a robust surge in its share price over the past year, rising by almost 72% and nearing recent 52-week highs. This increase can be attributed to improved earnings prospects, primarily driven by the uptick in the gas trading and marketing business, although the outlook for the petrochemical segment remains mixed. Additionally, the company's dividend yield presents another positive aspect for investors.
Analysts are closely monitoring two key projects recently highlighted by the company. The first involves green hydrogen production and blending to reduce carbon emissions, which has garnered positive attention. Numama Institutional Equities analysts commend GAIL's efforts toward achieving net zero emissions by 2040 through initiatives like hydrogen blending, green hydrogen production, and the establishment of compressed biogas (CBG) plants and LNG dispensing stations.
GAIL's initiatives to enhance gas supplies and penetration in underpenetrated areas are also viewed favorably for earnings. The company is already benefiting from robust gas demand in the country, and improved geographical reach by City Gas Distribution companies is expected to further boost overall pipeline volumes, keeping analysts optimistic.
Analysts foresee improved performance in the petrochemical segment, despite its historical volatility. Motilal Oswal Financial Services projects a 14% CAGR in EBITDA during FY24-26, driven by increased natural gas transmission volumes and enhanced profitability in the petrochemical segment.
JM Financial Institutional Research has raised its FY25–26 EBITDA estimates by 11–14%, primarily due to the strength in gas trading EBITDA. Meanwhile, analysts at Antique Stock Broking and Numama have Hold ratings, expressing caution regarding cyclicality in the petrochemical business and declining LNG prices, which could impact offtake and lead to higher-priced take or pay contracts.
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