Despite a 10% increase in GAIL's stock this year, foreign brokerage Jefferies has maintained their 'underperform' rating on the natural gas company. They have also set a target price of Rs 150, indicating a downside of over 17% from the current levels. The recent announcement of unchanged natural gas tariffs by PNGRB has also been cited as a potential risk for the company. On the other hand, GAIL plans to commission its first green hydrogen project in India this month, in line with the country's target of reaching 5 million tons of annual green hydrogen production capacity by 2030.
GAIL Remains Underperform Despite Stock Gains, Jefferies Maintains Negative Outlook
GAIL (India) Limited (GAIL), a leading natural gas company in India, has seen a 10% increase in its stock price this year. However, foreign brokerage Jefferies has maintained its 'underperform' rating on the company, citing the recent announcement of unchanged natural gas tariffs by the Petroleum and Natural Gas Regulatory Board (PNGRB) as a potential risk. Jefferies has also set a target price of Rs 150, indicating a downside of over 17% from the current levels.
Background
GAIL is responsible for importing, transporting, and distributing natural gas across India. It operates a network of over 11,000 kilometers of pipelines, connecting gas fields to consumers. The company has been expanding its operations in recent years, diversifying into petrochemicals, power generation, and renewable energy.
Jefferies' Outlook
Jefferies has cited several factors for its negative outlook on GAIL. The unchanged natural gas tariffs by PNGRB are expected to impact the company's profitability. In addition, Jefferies believes that GAIL faces competition from other natural gas suppliers, including LNG importers. The brokerage firm also notes that GAIL's valuations are still relatively high compared to its peers.
GAIL's Green Hydrogen Project
Despite the negative outlook from Jefferies, GAIL is continuing to invest in its green hydrogen business. The company plans to commission its first green hydrogen project in India this month. This project is part of the government's ambitious target of reaching 5 million tons of annual green hydrogen production capacity by 2030.
Top 5 FAQs
1. Why has Jefferies maintained an 'underperform' rating on GAIL?
Jefferies' negative outlook is based on concerns about the impact of unchanged natural gas tariffs, competition, and high valuations.
2. What is GAIL's plan for green hydrogen?
GAIL plans to commission its first green hydrogen project in India this month and has a target of reaching 5 million tons of annual green hydrogen production capacity by 2030.
3. How has GAIL's stock performed this year?
GAIL's stock has gained 10% this year despite Jefferies' negative outlook.
4. What are the risks to GAIL's business?
The risks to GAIL's business include regulatory changes, competition, and a slowdown in the economy.
5. What is GAIL's competitive advantage?
GAIL's extensive pipeline network and experience in natural gas transportation and distribution provide a competitive advantage over other suppliers.
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