Buy GAIL (India) Ltd. target Rs 360: HDFC Securities

HDFC Securities has a buy call on GAIL (India) Ltd. with a target price of Rs 360. The current market price of GAIL (India) Ltd. is Rs 340.75. Time period given by the brokerage is a year when GAIL (India) Ltd. price can reach defined target. GAIL (India) Ltd., incorporated in the year 1984, is a largecap company with a market cap of Rs 76706.24 crore.

Investment rationale by HDFC Securities

We adopt EV/EBITDA as our valuation methodology, arriving at a target price of Rs 360/share. We ascribe a higher 7.5x EV/EBITDA multiple for the more stable Gas and LPG transmission businesses and 5.0x EV/EBITDA multiple to more volatile gas marketing business. We value the cyclical petrochemicals and LPG/LHC businesses at 6.5x EV/EBITDA. After subtracting net debt, we arrive at a core value per share of Rs 272/share. To this, we add Rs 71/share as value of GAIL’s investments in various listed and unlisted companies. We add Rs 18/share towards the company’s CWIP. Reinitiate coverage with BUY.