GAIL (India) – II

I valued GAIL (India) back in April and arrived at an intrinsic valuation of ₹178.60. Since then, the stock has rallied tremendously and made 20% in little under two months. They released their Q4 numbers today and I took another look at the valuation keeping my story the same.

Numbers and Narratives

Gail (India) is a major player in the natural gas value chain of India. It is a monopoly garnering close to 70% share in the market. I expect it to have a growth rate of a mature company combined with the growth of natural gas market in India. I also expect it to keep greater than average margins given its competitive advantages.

The core numbers that I arrive at based on the story are

  • Compounded revenue growth for next 5 years = 9% COVID Adjusted (8% industry average)
  • EBIT margin in year 5 = 15% (~15% industry average)
  • Initial cost of capital = 7.86%


I’ve used the above numbers along with the financial information to compute my DCF valuation for GAIL (India) as seen below.

As you can see, the valuation price came out to ₹201.79, about 25% higher than the last traded price of ₹162.40.



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