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Growth guidance strong

PAT up 295% YoY, led by transmission, marketing and petchem

GAIL (GAIL IN) posted a PAT of INR 21.8bn versus INR 27.0bn estimated. The negative surprise was due to higher depreciation and interest costs and one-off transmission expenses. But Q4 PAT rose 295% YoY on: 1) a 438% YoY rise in gas transmission EBITDA to INR 16.0bn on 14% volume growth and a 39% rise in tariff, 2) gas marketing EBITDA at INR 16.3bn, up 183% YoY, with normalization of Gazprom supply and 4% volume growth, 3) LPG and liquid hydrocarbon (LHC) EBITDA at INR 3.6bn, up 147% YoY, and 4) petchem EBITDA at INR 4.3bn versus INR 2.6bn loss in Q4FY23.

Gas transmission & marketing: Volume growth guidance reiterated

GAIL guided that gas transmission volume may grow 10-12mmscmcd in FY25-26 each. It guided that gas marketing volume may increase to 105mmscmd in FY25 (7% YoY). With four pipeline sections expected to be commissioned in FY25, volume growth will be aided by CGD and fertilizer sector growth.

LNG export capacity: Expect massive additions globally

Per management, domestic demand may witness strong growth going forward due to cheaper LNG led by massive LNG export capacity addition wave of ~190mn tonnes in the next six years, which we estimate would be ~50% of the current global LNG trade.

Valuations: reiterate Accumulate; TP raised to INR 227

We up FY26E EPS 3% due to higher gas transmission and marketing volume. Thus, we raise TP to INR 227 (from INR 191). We reiterate Accumulate as GAIL has run-up 62% in the past three months, partly factoring in strong gas volume growth outlook, led by accelerating CGD demand and +150mn tonnes LNG export capacity addition globally in CY24-28. We value GAIL on SOTP, assuming 5.5x (from 5.0x) FY26E petrochemical EV/EBITDA, 5.5x (from 5.0x) FY26E LPG & LHC EV/EBITDA, 12.0x (from 9.2x) FY26E EV/EBITDA for transmission and 5.0x (from 4.5x) FY26E gas marketing EBITDA.

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