Nomura Financial Advisory and Securities find GAIL's recent stock run perplexing. ''First there was euphoria: it rose from mid-August lows by a sharp 36% to an all-time high at end-Oct. It then corrected by a steep 20%. While near-term concerns remain on weak commodity prices and subsidies, we think the long-term outlook still looks good,'' it said.

''During the panic, the market seemed to ignore several positive factors: the low domestic gas price hike (c.7% for GAIL's internal consumption), a positive ruling by the appellate tribunal (requested that regulator ensure 12% after-tax ROCE), and large potential gains from selling Henry Hub-linked contracts. We view the correction as an opportunity to accumulate shares,'' said Nomura.

''We cut FY15F earnings by 14% (tariff orders and weak marketing in 1H, and lower petchem), and 8% for FY16F (delayed petchem upcycle). Given higher concerns over petchem, we assume a lower EV/EBITDA multiple. We also cut our FY15/16F subsidy assumptions to Rs 10/5 billion (14/8 earlier). Despite our earnings cuts, our TP is unchanged due to roll forward,'' it opined.

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