A pressure gauge sits on outdoor pipework at the underground gas storage facility. (Photographer: Martin Divisek/Bloomberg)

GAIL Rises On CLSA Upgrade To Buy After Weak March Quarter

Shares of GAIL (India) Ltd. rose the most in nearly three weeks after brokerage CLSA upgraded its rating on the country’s largest state-run gas processing and distribution company.

CLSA upgraded the stock to ‘Buy’ from ‘Sell’ and raised the price target to Rs 405 from Rs 337.5 on lower risks from U.S. LNG with which GAIL has an import deal. “The recent crude price spike not only eliminates the U.S. LNG risk, but also boosts its core earnings per share....China demand and crude spike have turned U.S. LNG from a headwind to a tailwind,” the brokerage said in a report.

The state-owned gas utility quarterly profit slumped 19 percent sequentially for the quarter ended March. That’s due to “bunched-up” expenses and lower gas trading, CLSA said.

Currently 26 analysts have a ‘Buy’ rating on the stock, eight have a ‘Hold’ rating and two recommend ‘Sell’. The Bloomberg consensus 12-month target price is at Rs 376.5.

Here’s what other brokerages had to say:

Morgan Stanley

  • Maintains ‘Overweight’, with a price target of Rs 510.
  • High imported gas costs were key to the Q4 miss; operationally good quarter.
  • GAIL’s contracted gas sourcing should shield it from seasonal volatility.
  • Concerns about contracted LNG diminish.

Motilal Oswal

  • Upgrades to Neutral from Sell with a price target of Rs 303
  • Upgraded the stock purely on valuations.
  • Performance was impacted by higher gas cost which lowers GAIL’s ability to charge higher marketing margin.

Shares of the company rose more than 4 percent to Rs 319.45 on the BSE as of 2:4 0 pm.

Also Read: GAIL Looks To List Subsidiary GAIL Gas

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