Brokerage Firm Prabhudas Lilladher Recommends Buying GAIL India, Sets Target Price of Rs 190

GAIL India Faces Disruption-Related Earnings Declines in Q4FY26

GAIL India, a leading gas transmission and processing company, has reported a decline in earnings for the fourth quarter (Q4) of fiscal year 2026 (FY26). According to a research report by Prabhudas Lilladher, the company's transmission volumes decreased to 119.0 million standard cubic meters per day (mmscmd) in Q4FY26 from 125.5mmscmd in Q3FY26 and 120.8mmscmd in Q4FY25. Despite a healthy underlying run-rate of approximately 129mmscmd during January and February 2026, supply disruptions affected the average Q4 volumes.

The company's standalone reported earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at INR11.5 billion, which is lower than the projected estimate (PLe) of INR20.6 billion and the broker's estimate (BBGe) of INR24.7 billion. The EBITDA decline was primarily due to weak performance in the Trading and Transmission segments, as well as continued losses in the petrochemical (petchem) business. The reported profit after tax (PAT) stood at INR12.6 billion, impacted by higher interest expenses.

A partial offset to the earnings decline was the lower depreciation, which was supported by an increase in the useful life of certain gas, liquefied petroleum gas (LPG), and petchem pipelines. GAIL has forecasted transmission volumes of 115mmscmd under a prolonged West Asia disruption scenario and 119mmscmd assuming normalization by mid-July. In the Trading segment, the company expects a profit before tax (PBT) of INR40 billion under a prolonged disruption scenario, improving to INR45 billion if normalization occurs by mid-February 2027.

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Estimated Comparison of Transmission Volumes

We maintain our BUY rating on GAIL India, supported by medium-term volume recovery and a favorable gas demand outlook. The stock is currently trading at 14.5x and 10.7x earnings per share (EPS). We value the stock at 11.0x fiscal year 2028 (FY28) EPS and add INR40 per share for investments at a 25% holding company discount, arriving at a target price (TP) of INR190 per share (earlier: INR170 per share).