GAIL shares surge 6% to hit 52-week high; here's why

Shares of state-run GAIL Ltd surged as much as 5.9% to hit a 52-week high of ₹143.90 apiece on the BSE, a day after the petroleum and natural gas major filed an arbitration against SEPE Marketing & Trading Singapore Pte Ltd, a former Gazprom unit, worth ₹15,000 crore or $1.817 billion in the London Court of International Arbitration. 

The scrip opened at ₹139.85 apiece on the BSE, up 2.7%, as against the previous closing price of ₹136.15. At 11:41 am, the company's share price was trading 4.15% higher at ₹141.80. The company's market capitalisation stood at ₹93,267.79 crore with more than 38.8 lakh shares exchanging hands on the BSE as against the two-week average of 12.10 lakh shares. The company hit a 52-week low of ₹90.20 on December 12 last year. In the past one month, three months and one year, the counter has given 14.67%, 15.65% and 52.20% in returns, respectively.

According to the state-run company, the arbitration pertains to the non-supply of LNG cargoes to GAIL under long-term LNG contract. The arbitration was filed on November 30 this year.

In the July to September quarter this year, the company’s standalone profit surged as much as 56% year-on-year (YoY) to ₹2,405 crore as against ₹1,537.07 crore in the same period last year. The revenue of operations of the petroleum and natural gas major during the period under review, however, slipped 17.32% to ₹31,822.62 crore, as against ₹38,490.98 crore in the same period last year.

Earlier this year, the company announced its plans to invest ₹30,000 crore in the next three years.

According to GAIL chairman Sandeep Kumar Gupta, the company plans to invest primarily in pipelines, petrochem & city gas distribution projects, and equity contribution projects.

In the fiscal year 2022-23, GAIL made capital expenditure worth ₹10,000 crore, Gupta says in the annual shareholders' meeting. For the next calendar year, the PSU major aims for the completion of 4,200 km of pipelines, which will take its total pipelines under operation to 20,000 km.

According to Gupta, GAIL has also been authorised to build the Gurdaspur-Jammu Natural Gas pipeline, which has a length of 160 km, with a capex of ₹522 crore.

Most analysts have remained bullish on the company’s stocks, with a BUY rating. "Our BUY recommendation on GAIL with a target price of ₹145 is based on (1) an increase in gas transmission volume to 129mmscmd by FY25 on the back of an increase in domestic gas production, (2) completion of major pipelines in eastern and southern India, and (3) expectation of improvement in earnings from the petchem segment. Q2FY24 reported EBITDA/PAT at ₹35/24bn, came in above our estimates, driven by an improvement in natural gas transmission volumes and higher marketing margins. Depreciation at ₹7.5bn (+21% YoY, +18% QoQ) came above expectation," say analysts at HDFC Securities.

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