Over 90% Return in 1 Year! Do You Own This Highest Dividend Paying PSU Stock?

Shares of Gas Authority of India Limited (GAIL) have delivered over 90 per cent return in 1 year. The PSU stock has recovered over 98 per cent from its 52-week low of Rs 93.15, hit on February 22, 2023.

According to Axis Securities, GAIL also delivered a dividend of Rs 9.5 per share with the highest dividend yield of 5 per cent among PSU stocks in the last 12 months. The dividend yield is an indicator of the return that investors are earning on their shares.

About the company

GAIL (India) Limited is a natural gas company with interests across the natural gas value chain of trading, transmission, LPG production and transmission, LNG re-gasification, petrochemicals, city gas, E&P, etc. It owns and operates a network of around 15583 km of natural gas pipelines and commands around 70 per cent market share in gas transmission and has a gas trading share of over 50 per cent in India.

It was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum and Natural Gas. The company was initially given the responsibility of construction, operation & maintenance of the Hazira - Vijaypur -Jagdishpur (HVJ) pipeline Project.

GAIL: Financial Performance

GAIL's standalone profit stood at Rs 2,842.6 crore in the quarter ending December 31, up 18 per cent from Rs 2,404.89 crore in the previous September quarter. The revenue from operations jumped 8 per cent to Rs 34,253.5 crore, compared to Rs 31,822.6 crore in the second quarter of the fiscal year 2024. The company also declared an interim dividend of Rs 5.50 per equity share amounting to Rs 3,616.30 crore.

What's next?

According to Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, the stock is exhibiting a strong upward trend. The lower-end support is identified at Rs 165, providing a crucial cushion for the bulls. It can potentially reach upside targets of Rs 190-200 in the near term.

Sharekhan expects GAIL to post a strong earnings recovery across its business segments supported by stabilising global LNG supplies and improving the price environment for its commodity businesses.

It has increased its FY24 earnings estimate to factor in strong 9-month FY24 performance and has fine-tuned its FY2025-FY2026 earnings estimates. The brokerage firm has maintained its Buy rating on GAIL with a revised price target of Rs 200.

Motilal Oswal believes that better-than-expected performances in the gas transmission, LPG and petchem segments drove the robust results. It expects a substantial improvement in petchem segment’s profitability over the second half of FY25- FY26, as the new petchem capacity will be operational and low inventories globally will drive re-stocking demand.

The brokerage expects GAIL’s return on equity (RoE) to improve to 15 per cent in FY26 from 9.5 per cent in FY23 with a healthy free cash flow generation. It has maintained its 'Buy' rating on GAIL and raised the target price to Rs 200.

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