Buy GAIL India; target of Rs 245: ICICI Securities

Mumbai, June 27, 2025:
ICICI Securities has issued a bullish outlook on GAIL (India) Limited, recommending a "Buy" rating with a target price of ₹245, implying a potential upside of over 20% from the stock's current trading levels. The brokerage firm cited strong fundamentals, an expected uptick in petrochemical margins, and robust demand for natural gas as key drivers for its optimistic forecast.

Strong Fundamentals Back the Call

GAIL, India’s largest gas transmission and marketing company, has recently witnessed improvements across its key business verticals — gas transmission, gas trading, LPG and liquid hydrocarbon (LHC) production, and petrochemicals.

“GAIL is well-positioned to benefit from a structural increase in gas consumption in India, driven by government focus on cleaner fuels and expansion of city gas distribution (CGD) networks,” ICICI Securities said in a recent research note. The firm also highlighted the company's integrated business model as a core strength.

Petchem Segment Recovery in Sight

One of the primary tailwinds for GAIL is the expected recovery in petrochemical (petchem) spreads. Global petchem markets have seen some signs of stabilization after a prolonged downturn, and GAIL’s petchem operations, which had been under pressure, are now showing signs of a turnaround.

“Petchem realisations are expected to recover in FY26 as global oversupply eases and demand picks up. This could act as a key earnings lever for GAIL,” the report added. Analysts forecast a potential 18–20% YoY improvement in petchem EBITDA for FY26.

Gas Transmission Volumes Poised to Grow

With the government’s ambitious target to raise the share of natural gas in the energy mix to 15% by 2030, GAIL stands to gain significantly. It operates over 15,600 km of natural gas pipeline, forming the backbone of India's gas infrastructure.

ICICI Securities noted that gas transmission volumes are expected to grow by 7–8% annually, aided by improved demand from CGD companies, refineries, and the power sector. “Incremental volumes from the Urja Ganga pipeline and the upcoming Kochi-Mangaluru pipeline expansion will also be value-accretive,” the brokerage mentioned.

LNG Trading and Global Diversification

GAIL's LNG trading and international forays have added resilience to its business model. The company is actively scouting for overseas gas assets and has continued to engage in long-term LNG contracts.

“GAIL's strategic LNG contracts with suppliers in the US, Russia, and Qatar ensure price competitiveness, and its flexibility to divert cargoes supports margin stability,” said the ICICI Securities analyst. The company has also been successful in arbitraging LNG cargoes to optimize its trading profits.

Financial Snapshot

• Revenue (FY24): ₹1.36 lakh crore

• Net Profit (FY24): ₹8,760 crore

• Debt-to-equity ratio: 0.13x

• Return on Equity (ROE): 12.4%

GAIL’s balance sheet remains strong, with ample cash reserves and a low leverage profile, giving it headroom for expansion and potential dividend increases.

Analyst Commentary

“We believe GAIL offers a compelling combination of stable regulated earnings from gas transmission and upside potential from cyclical segments like petchem and LPG,” said Ravi Shenoy, Lead Oil & Gas Analyst at ICICI Securities. “The stock is trading at 8.2x FY26E EPS, which is attractive compared to its historical average.”

Risks and Concerns

While the outlook is positive, there are certain risks investors should consider:

• Delay in commissioning of new pipelines or terminals

• Prolonged weakness in global petchem markets

• Volatility in LNG prices and currency fluctuations

• Regulatory risks including tariff revisions by PNGRB

However, ICICI Securities believes these risks are manageable given GAIL's diversification and execution capabilities.

Market Context

GAIL's stock has shown resilience amid market volatility. It closed at ₹203.45 on the NSE on June 26, 2025, up nearly 15% year-to-date. The stock has outperformed the Nifty Energy Index, which rose 8.2% during the same period.

Investors have responded positively to the company’s proactive capex plans, rising LNG volumes, and dividend payouts. The government’s increasing focus on gas-based economy and carbon-neutral energy solutions has also improved sentiment for public sector energy firms like GAIL.

Investor Outlook

ICICI Securities’ target price of ₹245 suggests a 20.5% upside from current levels, with the recommendation based on:

• Stable cash flows from regulated business

• Recovery in petchem segment

• Volume growth from new gas pipelines

• Strategic LNG portfolio and trading gains

• Attractive valuations and dividend yield (~4%)

For long-term investors looking to play the gas infrastructure theme, GAIL remains a solid bet, supported by government policy tailwinds, diversified revenue streams, and a robust financial profile.