GAIL (India) (GAIL)

FairStock Score: 84/100 — HIGH CONVICTION

Score breakdown: P/E: 2/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 1/1

Key Financials

Strengths

• Hard-to-replicate gas transmission infrastructure provides a practical monopoly-like moat.
• Conservative balance sheet with Debt/Equity of 0.25 and ROCE of 14.05%.
• Strong free cash flow of ₹9,112 crore supports a 4.42% dividend yield.
• Promoter holding of 51.88% and a P/B of 1.28 provide some downside cushion.

Concerns

• Profit fell 31.99% and sales declined 0.60%, so trailing earnings may not reflect true earning power.
• DCF intrinsic value of ₹39.13 and EV/EBITDA of 112.69 are major red flags versus the current price.
• ROE of 10.11% is mediocre, and Altman Z-score of 2.53 is not a strong safety signal.

AI Analysis

Let me first look at what GAIL owns. Pipelines to move natural gas are the kind of infrastructure Buffett likes: hard to replicate, essential, and monopolistic in a practical sense. The numbers support a stable machine: debt-to-equity is only 0.25, ROCE is 14.05%, and free cash flow is ₹9,112 crore. That cash flow also funds a 4.42% dividend, which is a meaningful return while I wait. The promoter holding of 51.88% aligns ownership with minority shareholders, at least in structure. But I cannot be blind to the deterioration. Sales grew at 19.86% annually over five years, yet the latest year shows sales down 0.60% and profit down 31.99%. That is a sharp reminder that gas marketing has cyclicality. The P/E of 12.98 is not demanding, and the P/B of 1.28 against book value ₹129.27 is reasonable. Graham’s number is ₹194.53, so the stock offers a 12.85% margin of safety to that conservative measure. The FairStock score of 62/100 and Piotroski 6/9 indicate moderate health. What troubles me is the DCF figure of ₹39.13 and an EV/EBITDA of 112.69. I cannot dismiss those. If normalized earnings are far below trailing profits, then ₹164.95 is not the bargain that the P/E alone suggests. The Altman Z-score of 2.53 is not a clean bill of health either. A true margin of safety requires price to be below what conservative numbers show. On this evidence, I would wait for either a better price—perhaps near the lower end of the 52-week range—or visible earnings recovery. This is a solid pipe-and-gas business, but not one to chase at this precise price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer