GAIL’s June quarter earnings have drawn a fresh round of commentary from global brokerages, with Macquarie and Nomura reiterating positive ratings after the company delivered a much stronger-than-expected operating performance. Morgan Stanley, while acknowledging the strong quarter, retained a more cautious stance The differing views have left GAIL among the closely watched public sector energy stocks after its June quarter results.
Macquarie on GAIL: ‘Outperform’
Macquarie has maintained its ‘Outperform’ rating on GAIL (India) with a target price of Rs 205, implying an upside of about 16.6%.
According to Macquarie, GAIL delivered a strong June quarter with earnings comfortably ahead of expectations, led by gas marketing and transmission. The brokerage said the company’s regulated transmission business continues to improve, while India’s structural rise in natural gas consumption supports long-term volume growth. It also expects expanding pipeline utilisation and improving gas demand from city gas distribution, industries and power to support earnings over the coming years.
Macquarie noted that the gas marketing business benefited from favourable pricing dynamics during the quarter. However, it expects those extraordinary gains to soften in subsequent quarters as commodity spreads normalise. Despite that, the brokerage believes the core transmission business continues to strengthen and remains the key earnings driver over the medium term.
Macquarie said, “The transmission business remains structurally attractive with rising utilisation and improving gas demand.” It also said the June quarter reflected “strong operating performance across businesses.”
Nomura on GAIL: ‘Buy’
Nomura has reaffirmed its ‘Buy’ rating on GAIL with a target price of Rs 195, implying an upside of 7.7%. The brokerage said the June quarter significantly exceeded its expectations across business segments, although it expects some moderation in earnings over the remaining quarters as exceptional gas marketing gains normalise.
According to Nomura, GAIL reported adjusted EBITDA of Rs 6,380 crore, up 250% quarter-on-quarter and 156% above its estimate. Gas transmission volume rose to 122.4 million metric standard cubic metres per day, prompting management to raise FY27 guidance to 123 mmscmd from the earlier 115-119 mmscmd. Nomura said this was one of the biggest positives from the quarter and added that there could be further upside if geopolitical conditions in West Asia improve sooner than expected.
The brokerage said gas marketing produced the biggest earnings surprise. Segment EBIT rose to Rs 3,480 crore, well above its estimate of Rs 710 crore, driven by a mismatch between nine-month Japan Crude Cocktail-linked sourcing contracts and three-month linked sales contracts during the sharp rise in Brent crude prices. Even so, Nomura expects these gains to moderate over the next three quarters and therefore kept its overall earnings estimates broadly unchanged.
Nomura said, “Gas Transmission volume guidance being raised to 123mmscmd (from 115-119mmscmd earlier) was a key positive, in our view, and there could be further upside risks to this if the West Asia crisis were to be resolved earlier than expected.” It also said, “Our EBITDA estimates are largely unchanged, as we expect a partial reversal in Gas Marketing earnings over the next three quarters.” The brokerage reaffirmed its positive stance, saying, “We reaffirm our Buy with an unchanged SOTP-based TP of INR195.”
Morgan Stanley on GAIL ‘Equal-weight’
Morgan Stanley has retained its ‘Equal-weight’ rating on GAIL with a target price of Rs 190, implying an upside of around 5% from the reference price used in its report.
The brokerage acknowledged that GAIL reported a much stronger-than-expected quarter, supported by unusually high gas marketing margins and better transmission performance. However, it believes a large part of the earnings surprise came from temporary factors linked to the West Asia crisis and commodity price movements rather than a structural improvement in profitability.
Morgan Stanley expects gas marketing margins to ease as pricing normalises and therefore remains more conservative than bullish peers on the stock’s earnings trajectory. It nevertheless sees transmission volumes remaining healthy after the upward revision in management guidance.
Morgan Stanley said, “The June quarter was significantly ahead of expectations.” It also noted that “gas marketing gains are unlikely to sustain at current levels.”
GAIL: Why brokerages agree
Despite their different ratings, all three brokerages acknowledge that GAIL’s June quarter materially exceeded expectations. Each points to stronger gas transmission volumes and an exceptionally strong gas marketing business as the primary reasons behind the earnings beat.
Another common theme across the reports is that the transmission business is becoming increasingly important. Management’s decision to raise FY27 transmission volume guidance to 123 mmscmd is viewed as a positive development, reflecting improving domestic gas demand and higher pipeline utilisation.
GAIL: Why brokerages differ
The biggest difference lies in how each brokerage assesses the sustainability of recent earnings.
Macquarie remains the most optimistic, arguing that structural demand growth and improving transmission utilisation justify a higher valuation despite the expected moderation in gas marketing margins.
Nomura also remains positive but believes the exceptional gains in gas marketing are unlikely to continue through the rest of FY27. It therefore leaves its medium-term earnings estimates largely unchanged even after the strong June quarter.
Morgan Stanley, meanwhile, remains the most cautious. While recognising the strong operating performance, it believes a meaningful portion of the earnings surprise was driven by temporary factors and therefore prefers to wait for more evidence of sustainable earnings growth before turning more constructive.
Conclusion
The June quarter has strengthened confidence in GAIL’s core transmission business, but global brokerages remain divided on how much of the earnings surge can continue through the rest of FY27.
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