GAIL - Improving Macros Supportive: Motilal Oswal

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Motilal Oswal Report

GAIL India Ltd. has been our large cap top pick in the oil and gas sector, we upgraded it to Buy in August 2019, after being neutral on the name over the previous five years.

We upgraded the stock on premise of increased availability of gas, which would aid gas transmission and trading businesses of the company.

However, since last year, the volatility in the trading segment has brought down one year forward price-earnings from 13 times to nine times currently.

Although decreased demand especially due to Indian lockdowns have started to have an adverse impact on liquefied natural gas prices, nonetheless crude linked LNG prices remain strong; while expected commissioning of the fertilizers plants is expected to eliminate concerns on the trading segment, thereby warranting a re-rating of the stock.

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