Stocks To Buy: Gas PSU may see 34% upside on potential tariff hike, Jefferies says

Brokerage firm Jefferies has reiterated its ‘Buy’ recommendation on state-run GAIL, citing potential gains from an expected increase in the unified pipeline tariff.

Jefferies’ “buy” recommendation for GAIL comes with a price target of ₹210, which implies a potential upside of 12% from Thursday’s closing levels.

However potential for a tariff revision and improved profitability of the company are some of the major factors that can trigger price targets between ₹235 to ₹250, implying a potential 34% upside, Jefferies wrote in its note on Thursday, June 26.

According to the brokerage, the Petroleum and Natural Gas Regulatory Board (PNGRB) is likely to notify the final unified tariff order at its next board meeting.

GAIL has sought a 33% hike in the unified tariff to ₹78 per Million Metric British Thermal Unit (mmbtu). Jefferies, however, is building in a more conservative 10% increase in its base case. The company itself is hopeful of securing around a 20% rise, driven by a 6% reduction in the capacity of its unified pipeline system, which could have a favourable impact.

Also Read: GAIL Q4 Results: Net profit nearly halves, revenue misses estimates

According to Jefferies’ estimates, a 10% to 20% hike in tariff could lift GAIL’s transmission Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) by 13% or 26%, respectively, in financial year 2027, compared to its current projections. Return on Capital Employed (ROCE) could rise to 10% or even 12% under these scenarios, higher than the current levels of 8%.

Shares of GAIL ended 1.7% higher on Thursday at ₹187. The stock has been an underperformer in 2025 so far, declining 2.1% in value. Jefferies’ price target on GAIL implies a re-test of its recent 52-week high levels of ₹246.

First Published: 

Jun 27, 2025 5:08 AM

IST