Analyst Corner: Gail India – Recent correction offers opportunity to ‘buy’
Our interaction with Gail management provided comfort on progress on East India gas grid, placement of high-priced contracted LNG volumes and plausible regulatory overhaul of gas pipeline tariffs. Near-term clarity on AGR liability, which is untenable in Gail’s opinion, will be crucial for the stock. Sustained lower crude prices may pose downside risk to estimates; however, inexpensive valuations reflect all concerns. Recent sharp correction offers opportunity to ‘buy’.
Our visit to a few construction sites around Durgapur region, organized by Gail, suggests that the physical progress of Jagdishpur-Haldia pipeline remains on track to complete in phases by December 2020. The section connecting Matix fertilizer plant will be commissioned in a month. Gail management indicated that work on Bokaro-Dhamra and Barauni-Guwahati sections is also progressing well and is expected to complete by December 2020 and 2021, respectively, which will mark the full commissioning of Pradhan Mantri Urja Ganga project.
