We visited the Vijaipur plant of GAIL (India) and were joined by senior management from the company.

The management highlighted two futuristic projects, which form the cornerstone of the net zero and gas penetration strategies: the first entails a 4.3 tpd green hydrogen project, key to achieving decarbonisation objectives and marking a significant milestone in the company’s pursuit of a long-term target of 20 per cent hydrogen blending in natural gas; GAIL also highlighted the small scale LNG project (SSLNG), which the management believes would be instrumental in improving LNG availability in underpenetrated areas.

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We remain positive on GAIL as the capex cycle unwinds. The company has continued to explore new avenues for investments such as green hydrogen, SSLNG, and even coal to gas/chemicals.

During FY24-26, we are modeling EBITDA to report a 14 per cent CAGR, driven by: rising natural gas transmission volumes to 141 mmscmd in FY26 from 121 mmscmd in FY24; substantial improvement in the profitability of the petchem segment over H2-FY25-FY26, attributable to the commencement of operations of new petchem capacity and heightened demand driven by low global inventories; and the commencement of operations for 3,892 km of gas transmission pipelines and 560ktpa of petchem capacity.

At around 11x FY26 P/E and the current dividend yield of about 2 per cent, we believe valuations remain reasonable.

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