On Thursday, BofA Securities maintained its Buy rating and INR260.00 price target on Gail (India) Ltd. (GAIL:IN) (OTC: GAILF) stock, despite the company's second-quarter financial year 2025 (2QFY25) earnings missing Bloomberg consensus estimates. The standalone earnings before interest, taxes, depreciation, and amortization (EBITDA) for GAIL were reported at INR37 billion, falling short by 7%.
The natural gas (NG) marketing earnings before interest and taxes (EBIT) saw a significant quarter-over-quarter decrease of 35%, landing at INR13.3 billion. This decline was attributed to a 3% sequential drop in volumes, with the previous quarter having seen elevated levels due to higher power demand. Additionally, the profitability was affected by a reduced arbitrage opportunity between Henry Hub-linked gas sources and the sale of crude-linked gas.
Despite these challenges in the NG marketing segment, GAIL's NG transmission segment displayed resilience, with EBIT remaining robust at INR14 billion, a slight 3% dip from the previous quarter. The transmission volumes remained relatively flat compared to the previous quarter.
The report also highlighted performance in other segments of GAIL's business. The liquefied petroleum gas (LPG) transmission volumes showed a year-over-year increase of 1%, reaching 1,124 kilotonnes, also marking a 6% rise quarter-over-quarter.
The petrochemical (Petchem) segment's production experienced a sharp year-over-year increase to 234 kilotonnes, which is a 46% rise compared to the first quarter of FY25. This jump in production followed a planned maintenance shutdown in April 2024. The Petchem segment's EBITDA per tonne was reported at $148, a significant increase from $88 in the first quarter of FY25.
Additionally, the production of LPG and other hydrocarbons (OHC) increased by 6% year-over-year to 252 kilotonnes. However, the EBITDA per tonne for this segment saw an 11% quarter-over-quarter decrease to $131.
BofA Securities reaffirmed its positive stance on GAIL, citing a favorable risk-reward scenario for the company.
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