InvestorQ : Why has the stock of GAIL India seen such a sharp sell-off in recent days?
Angel dcosta made post

Why has the stock of GAIL India seen such a sharp sell-off in recent days?

Juvina Maggie answered.
1 month ago

GAIL had reported fairly strong Q1 results, but the stock has been on a down run for the lst few days. For instance, GAIL reported 116% growth in revenues at Rs37,572 crore and an 81% growth in EBITDA to Rs4,365 crore. One concern was that operating margins in the Q1FY23 quarter did taper to 11.6%. In terms of segment wise revenues, gas trading saw a sharp jump in profitability but the transmission segment did take a hit in the quarter. Gas trading Ebitda at Rs2,400 crore in Q1FY23 was largely led by robust LNG prices.

Now for the reason, the stock slipped. The slippage in the price wsa due to worries of gas supply disruptions. Due to supply constraints from Gazprom Russia, gas trading and transmission volume are expected to be lower by 5-7 mmcmd. GAIL currently has a 2.5 mmtpa LNG supply contract with Gazprom of Russia. Also, there were worries on the petchem front as sales volumes fell by 50% sequentially due to plant maintenance shutdown. EBITDA of the petchem segment was down 66% at Rs170 crore.

The stock price of GAIL India dropped from Rs 140 to Rs 132 with the market showing nervousness that the supply disruptions in the sector could also impact the downstream sectors like power and fertilizes apart from its own has consuming businesses. Analysts remain positive about the sector with valuations ranging between Rs176 to Rs197, but that really cannot be taken as a benchmark of what can happen.