GAIL

Hit by West Asia Conflict, Petchem Losses

shares have declined 11% since the West Asia conflict began, touching a 52-week low of ₹144.5. Disruptions in LNG supply chains, particularly through the Strait of Hormuz and QatarEnergy’s suspension of operations, are expected to weigh on GAIL’s transmission and marketing businesses. While diversified sourcing and stable US LNG contracts provide some cushion, weak petrochemical margins and supply curtailments add to earnings pressure. Business Impact - Transmission: - FY25 transported 123 mmscmd, with ~30% linked to Strait of Hormuz routes now stalled. - Transmission contributed 56% of 9MFY26 EBIT. - Marketing: - FY25 traded volume: 105 mmscmd, less exposed to West Asia (~16%). - Gains expected from higher spreads in US LNG contracts, as procurement prices remain stable while domestic selling prices rise. - US LNG procurement: 5.8 mtpa (~7.7 mmscmd). - Marketing contributed 42% of 9MFY26 EBIT. Segmental Performance - LPG, liquid hydrocarbons, and other segments contributed ~15% of EBIT. - Petrochemicals segment posted ₹1,000+ crore EBIT loss in 9MFY26, vs. ₹94 crore profit in 9MFY25, due to soft prices. - Government curtailment of gas supply to industrial sectors (petchem, power) adds further pressure. - Positive: 100% gas allocation to LPG production supports margins. Outlook - Conflict-driven supply disruptions likely to erode Q4FY26 profits. - Qatar LNG plant may take ~4 weeks to restart even after resolution. - Emkay Global cut FY26 EBITDA estimates by 8%. - Valuation: trades at 9.2x FY27E EPS, below long-term average of 10.7x (Bloomberg consensus). - Near-term risks: transmission volume loss, petchem weakness.