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GAIL’s Q4FY26 SA adjusted EBITDA/APAT came in at Rs20.0/12.2bn, implying a 4% miss at the EBITDA level but a 35% beat on APAT. Core earnings from gas transmission and marketing were below estimates (partly offset by a beat in other segments). The PAT beat was driven by lower depreciation (D/A) and ETR, and higher other income. The quarter also saw numerous adjustments pertaining to provisions, reversals, and D/A following the extension of the pipeline-petchem plant life by 10 years. Management guided FY26 marketing PBT at Rs40/45bn under scenarios of ME conflict extending/ending by Q2, while transmission volume guidance remains muted at 115/119mmscmd (volumes fell 30mmscmd in March MoM). Current pipeline volumes are at ~125mmscmd (driven by the power sector) and petchem is operating at 50% utilization amid healthy realizations. GAIL appears well positioned in the current environment, with oil prices above USD100/bbl and US Henry Hub gas prices below USD3/mmbtu. We raise FY27E SA EPS by 5%, while largely maintaining our FY28E earnings. We rollover to Mar-28E earnings, while building in higher capex in line with the guidance. We retain ADD and TP of Rs180.

Results highlights

GAIL’s Q4FY26 SA adjusted EBITDA/APAT fell 38%/40% YoY (down 25%/24% QoQ). Adj D/A declined 18% QoQ to Rs4.6bn, while adj other income of Rs6.4bn was a 17% beat (up 14% YoY). Adj transmission EBITDA declined 1% QoQ, with volumes down 5% QoQ to 119.0mmscmd (8% beat). Adj gas marketing EBITDA declined 56% QoQ to Rs4.9bn, with RLNG margins down to USD0.15/mmbtu (51% miss). Marketing volumes fell 2% QoQ to 101.9mmscmd. Adj LPG transmission EBITDA fell 6% QoQ to Rs1.4bn. Petchem EBITDA loss widened to Rs3.9bn from Rs3.5bn QoQ, on elevated gas cost. Sales volumes were a 20% beat, driven by inventory destocking. LPG-LHC EBITDA rose ~2.6x QoQ to Rs1.7bn on better realization. GAIL’s opex was higher than expected in Q4. For FY26, GAIL’s SA adj EBITDA/PAT fell 23%/24% amid lower transmission volumes and decline in petchem and LHC earnings. Dividend payout was ~52% in FY26.

Management KTAs

Amid the ME conflict, transmission volumes declined to 99.7mmscmd in Mar-26 from 129mmscmd in Jan-Feb’26 but are currently at 125mmscmd. The petchem plant is operating at 50% now; if this continues in FY27 at current realizations and costs, the segment is likely to breakeven, while higher utilization could support profits. Additional APM allocation of 0.79mmscmd for LPG&LHC is supporting higher volumes and profitability. PTA/PDH-PP projects are delayed to FY27/mid-FY28, while JHBDPL, KKMBPLII, Gurdaspur-Jammu, and C2-C3 lines are expected in FY27. FY27 capex is at Rs116bn.

Valuation

We value GAIL on SOTP-EV/EBITDA, with investments at a 30% holdco discount and unlisted investments at 1.0x BV. We raise our blended EV/EBITDA to 6.5x from 6.3x owing to segmental realignment. Key risks: Adverse commodity and currency movements, regulations, outages, and project delays.

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