GAIL – Profit Depleted

GAIL (India) Limited (previously Gas Authority of India Ltd.) is a central public sector undertaking (psu) under the ownership of Ministry of Petroleum and Natural Gas, Government of India. The company was incorporated in 1984 and is headquartered in New Delhi. The company’s functioning is monitored by the Ministry of Petroleum and Natural Gas. It has the following business segments: natural gas, liquid hydrocarbon, liquefied petroleum gas transmission, petrochemical, city gas distribution, renewable Energy including Solar & Wind, exploration and production, Petrochemicals, GAILTEL and electricity generation.

GAIL owns and operates a network of around 13,722 km of natural gas pipeline, over 2300 km of LPG pipelines, six LPG gas-processing units and a petrochemicals facility. Presently the company is executing about 6,000 km of pipeline projects of its own and about 2,000 km through two JVs, as part of the National Gas Grid. The Petroleum and Natural Gas Regulatory Board (PNGRB) has authorized the psu to execute a 1,755 km long Mumbai-Nagpur-Jharsuguda Pipeline.

GAIL has wholly owned subsidiaries in Singapore and the US for expanding its presence outside India in the segments of LNG, petrochemical trading and shale gas assets.

GAIL was honoured with the Maharatna status on 1 Feb 2013, by the Government of India.

Quarterly Earnings Walkthrough

GAIL registered their consolidated Net Sales at Rs 35,885 crore in December 2022 which have soared up by 37% from Rs 26,145 crore which was registered in December 2021.

The consolidated Net Profit was recorded at Rs 398 crore in December 2022 which has sharply fallen by 88% from Rs 3,474 crore which was recorded in December 2021.

The EBITDA was computed at Rs 931 crore for the quarter of December 2022 which has declined by 81% from Rs 5,048 crore which was computed in December 2021.

Large stake proposal

Gail India is planning to purchase a stake in a US liquefied natural gas export facility amongst a wider global effort to acquire supply in order to support the rising fuel demand.

According to a document released on the company’s website, the company has displayed interest to acquire a 26% equity block in an existing LNG plant or a proposed facility which will be commissioned by 2027. The US LNG project developers can submit an offer to GAIL.

Gail is looking for sourcing 1 million tons a year of LNG from the facility for 15 years beginning from 2026.

CLSA recommendation

According to reports, CLSA which is the global research firm has raised its target on GAIL India to Rs 125 per share, which represents an upside of about 20 percent from the current market price. This is an indication that CLSA is highly optimistic regarding the future prospects of GAIL India and believes that the stock has significant potential for growth.

Technical Analysis

GAIL Weekly Candlestick Chart on Sharekhan’s TradeTiger

GAIL stock price faces heavy resistance at the 61.8% retracement level and the price has failed 3 times previously to make a successful break over it. The price is currently attempting another break over this level and we shall soon see if the price remains restrained. The price may reach up to its lifetime high at around Rs 133 to reverse in the distribution zone. The stock is currently very bullish which is driven by CLSA for retaining the ‘buy’ tag on the stock. The weekly MFI is at 76 points which indicates that the stock is highly overbought, and the bullish trend may weaken.

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