Shares of GAIL India were surging on Wednesday as brokerages issued bullish calls on the stock even though the company's earnings were below street expectations in the second quarter of the financial year.

What Happened: GAIL reported a 10% increase in consolidated net profit to ₹2,690 crore in the quarter ended September. Revenue from operations rose marginally to ₹33,981 crore, compared with ₹33,049 crore in the same quarter last year.

The company reported capital expenditures of ₹1,885 crore during the quarter, primarily allocated to pipeline and petrochemical projects, bringing cumulative capex for H1FY25 to ₹3,544 crore.

Signs of Strength: Morgan Stanley and Jefferies both issued favourable calls on the stock, highlighting GAIL’s growth potential and re-rating prospects.

Morgan Stanley reiterated an “overweight” rating on the stock, setting a target price of ₹258 per share. The firm noted GAIL’s 19% integrated return on equity (RoE) in its gas pipeline business, linking potential stock gains to steady volume growth and increased domestic gas penetration.

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Jefferies upgraded GAIL India to a “buy” with a target price of ₹240 per share. Jefferies pointed to a 7% year-on-year EBITDA growth — slightly below estimates — which was supported by improvements in gas tax and petrochemical performance.

The brokerage emphasised GAIL’s growing market share, bolstered by new pipeline infrastructure, and anticipates further capacity additions by mid-2025. Additionally, Jefferies expects sustained trading profitability due to favourable Henry Hub gas prices and forecasts a 9% annual growth in EBITDA from FY24 to FY27.

After a 20% correction from recent peaks, Jefferies views the stock's current valuation as offering an appealing risk-reward profile.

Price Action: GAIL shares climbed 5.75% to ₹207.70 in early trade on Wednesday.

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