Why GAIL shares are rising despite weak Q4 results; brokerages see upside

GAIL Share Outlook: Shares of GAIL surged nearly 5 per cent on Monday, even as the state-run gas major reported a sharp decline in quarterly profitability and missed Street estimates at the operating level.

At 1:20 pm, shares of GAIL were trading at Rs 168.75 on the NSE, up Rs 7.98 or 4.96 per cent.

Analysts said investor sentiment remained positive as the company’s results were seen as stable on an adjusted basis despite a provision of around Rs 625 crore during the quarter. The Street also cheered stronger-than-expected gas transmission and marketing volumes, along with management commentary on a possible recovery in LNG supplies if tensions in West Asia ease.

Q4 profit and EBITDA decline sharply

GAIL reported a 38.4 per cent year-on-year decline in standalone net profit for the March quarter at Rs 1,260 crore. Profit was also down 21.2 per cent sequentially.

EBITDA fell sharply to Rs 1,150 crore, down 64.2 per cent from a year ago and 56.6 per cent lower sequentially. The decline was attributed to weakness in gas trading and transmission businesses, along with continued losses in petrochemicals.

Lower depreciation, however, provided partial support to earnings during the quarter.

Transmission, marketing volumes beat estimates

Despite weak profitability, the market reacted positively to stronger operational numbers.

Analysts noted that natural gas transmission volumes came in around 8 per cent above estimates, while gas marketing volumes exceeded Street expectations by nearly 20 per cent.

The stock also gained amid optimism that easing geopolitical tensions in West Asia and possible reopening of the Strait of Hormuz could improve LNG availability and energy flows to India.

The Strait of Hormuz remains one of the world’s most important routes for crude oil and LNG shipments, and any normalisation in traffic is expected to benefit India’s gas sector, which has faced supply disruptions in recent months.

Management guides for stronger FY27 volumes

Management guided for gas transmission volumes of 115 mmscmd in FY27 under a prolonged disruption scenario in West Asia.

However, if the conflict eases by July 2026 and supply conditions normalise, transmission volumes could rise to nearly 119 mmscmd.

On the gas marketing front, the company guided for marketing EBIT of over Rs 4,000 crore in FY27. Management said the figure could cross Rs 4,500 crore if LNG supply conditions improve during the second quarter of the financial year.

GAIL Gas expansion plans continue

GAIL Gas reported a profit of Rs 440 crore in FY26.

The company added 88 CNG stations during the year and plans to add another 275 stations over the next two years as part of its expansion strategy.

Brokerages remain positive on stock

Brokerages said valuations for GAIL have turned attractive after the stock corrected from its September 2024 highs.

The stock is currently trading close to its historical average valuation and at around 0.9x one-year forward core price-to-book value, excluding investment value.

Jefferies maintained its ‘Buy’ rating on the stock with a target price of Rs 180, though it reduced FY27 EBITDA estimates by 8 per cent due to weakness in gas trading and petrochemicals.

Meanwhile, UBS, Macquarie and HSBC maintained target prices of Rs 205 on the stock, citing improving operational outlook, better gas supply prospects and attractive valuations.