On Wednesday, Jefferies upgraded Gail (India) Ltd. (NS:GAIL:IN) (OTC: GAILF) stock from Underperform to Buy, while also increasing the price target to INR240.00 from INR190.00.
The firm's analysis indicated that Gail India's Ebitda grew by 7% year-over-year, despite being slightly below Jefferies' expectations, due to improved performance in Gas Transmission and Petrochemicals which helped offset weaker Trading results.
The upgrade was influenced by the strategic growth from new pipelines that are expected to enhance the company's market share. These developments are anticipated to continue as more pipelines are slated for commissioning by mid-2024.
Jefferies also noted that trading profitability is likely to remain solid against the backdrop of a subdued Henry Hub price, especially considering the current high levels of US gas inventories.
Jefferies projects a 9% compound annual growth rate (CAGR) in Ebitda from fiscal years 2024 to 2027. The rationale behind the positive outlook includes the potential for continued market share gains driven by the company's ongoing and future pipeline projects.
The decision to upgrade the stock and raise the price target comes after a 20% correction from Gail India's recent peak, which, according to Jefferies, presents a favorable risk-reward scenario for investors. The firm's revised price target of INR240 reflects this new assessment of the company's financial prospects and market position.
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