On Tuesday, CLSA adjusted its outlook on Gail (India) Ltd., raising the price target to INR170 from INR165, while maintaining a sell rating on the stock. The revision follows Gail's fourth-quarter financial performance, which presented mixed results.
The company's earnings before interest, taxes, depreciation, and amortization (Ebitda) for the fourth fiscal quarter of 2024 were slightly below CLSA's projections. However, the profit after tax (PAT) fell short of expectations by a more significant margin of 17%, primarily due to higher-than-anticipated depreciation stemming from the capitalization of new pipelines and a one-time reduction in the residual value of pipeline assets.
The report indicated that the most substantial deviation from the estimates was in the gas transmission segment, along with gas trading. Conversely, the petrochemical (petchem) division of Gail performed better than anticipated.
Looking forward, Gail's management has expressed a positive outlook for the fiscal year 2025, particularly for the petrochemicals business. They anticipate a reasonable profit as they expect to operate at full capacity throughout the year.
In light of these recent financial disclosures, CLSA has revised its earnings per share (EPS) estimates for Gail upward by 3-5%. Despite the increase in the price target and EPS estimates, CLSA reiterated its sell recommendation on the stock.
The firm suggests that there might be a potential downside of 19% for Gail's shares, indicating that the current market price may be overvalued relative to CLSA's assessment of the company's financial outlook and operational performance.
InvestingPro Insights
As Gail (India) Ltd. navigates through its fiscal challenges and opportunities, InvestingPro offers additional insights that could be pivotal for investors considering this stock. Gail's market capitalization currently stands at a robust $16.21 billion USD, evidencing its significant presence in the market. The company's P/E ratio, a key indicator of its valuation, is 13.6, suggesting that the stock is trading at a low price relative to near-term earnings growth—a noteworthy point for value investors.
One of the InvestingPro Tips highlights Gail as a prominent player in the Gas Utilities industry, which may provide a degree of stability and growth potential. Additionally, the company's ability to maintain dividend payments for 25 consecutive years, with a current dividend yield of 4.55%, reflects a strong commitment to returning value to shareholders. This is reinforced by a significant dividend growth of 103.57% over the last twelve months as of Q1 2023.
Investors may also find solace in the company's operational performance, with a high return on assets of 8.52%, which indicates efficient use of its assets to generate profits. For those looking for more comprehensive analysis and additional InvestingPro Tips, there are 12 more tips available that cover various aspects of Gail's financial health and market performance. To access these valuable insights, investors can visit https://www.investing.com/pro/GAIL and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.