GAIL Shares Rise 5% Despite Sharp Drop in Quarterly Profit and EBITDA, Hormuz Reopening Hopes

GAIL (India) Shares Surge 5.1 Percent Amid Optimism of Improved Gas Supplies

Shares of GAIL (India) rose 5.1 percent to Rs 169 in morning trade on Monday, despite the state-run gas major reporting a sharp decline in Q4 profitability and missing operating profit estimates. The investor focus shifted to the prospects of improved gas supplies if tensions in West Asia ease and the Strait of Hormuz reopens fully.

The optimism in the stock came as a result of brokerages retaining bullish views on the company. Analysts highlighted the potential for a recovery in gas transmission and trading volumes if liquefied natural gas (LNG) flows to India normalise in the coming months. The sharp decline in crude oil prices amid reports of progress in US-Iran negotiations raised hopes that the Strait of Hormuz could see normalised traffic.

The Strait of Hormuz is a critical route for global oil and LNG shipments, and improved energy flows would be positive for India's gas sector, which has faced supply disruptions in recent months. GAIL's standalone net profit for the fourth quarter fell 38.4 percent year-on-year and 21.2 percent sequentially to Rs 1,260 crore. EBITDA dropped sharply to Rs 1,150 crore, down 64.2 percent from a year earlier and 56.6 percent from the previous quarter, hurt by weak performance in the gas trading and transmission businesses as well as continued losses in petrochemicals.

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Jefferies maintained its 'Buy' rating on GAIL with a target price of Rs 180 per share. The brokerage said Q4 EBITDA missed estimates sharply due to weakness in gas trading and petrochemicals, but added that hopes remain for a relatively quick resolution of the Middle East conflict that could restore LNG flows to India. Jefferies reduced its FY27 EBITDA estimate by 8 percent while leaving FY28 forecasts broadly unchanged. It also raised FY27 and FY28 earnings-per-share estimates by 20 percent and 29 percent, respectively, owing to a sharp reduction in depreciation rates.

Prabhudas Lilladher also reiterated its 'Buy' rating and raised its target price to Rs 190 from Rs 170 earlier. The brokerage said transmission volumes declined to 119 million metric standard cubic metres per day (mmscmd) in the quarter from 125.5 mmscmd in the preceding quarter. However, the underlying run rate remained healthy at around 129 mmscmd during January-February before supply disruptions affected average volumes.

Management has guided for transmission volumes of 115 mmscmd under a prolonged West Asia disruption scenario, and 119 mmscmd if supply conditions normalise by mid-July. In gas trading, GAIL expects profit before tax of about Rs 4,000 crore if disruptions persist, rising to around Rs 4,500 crore should supplies normalise during the second quarter of FY27.

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Brokerages said the market appears to be looking beyond the weak quarterly earnings and focusing on medium-term volume recovery. Any reopening of energy trade routes and restoration of LNG supplies could improve gas availability, support transmission volumes and strengthen profitability in GAIL's core gas marketing and pipeline businesses.

The stock's rally also coincided with a broad risk-on move across Indian equities, with energy-linked shares gaining after Brent crude prices fell sharply on hopes of easing geopolitical tensions in the Gulf region.