GAIL and BPCL shares rise on ₹63,000 crore propane supply contract

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GAIL and BPCL shares rise on ₹63,000 crore propane supply contract

Shares of GAIL India and Bharat Petroleum Corporation Limited (BPCL) have seen a boost to ₹119.10 and ₹357.50, respectively, following the announcement of a 15-year propane supply contract worth ₹63,000 crore. The propane will be supplied to GAIL's petrochemical plant in Maharashtra from BPCL's Uran LPG import facility.

The Uran facility is set to expand its current capacity from 1 MMTP A to 3 MMTP A to accommodate the new deal. This expansion will support GAIL's first propane dehydrogenation-polypropylene (PDH-PP) project in Usar, which is slated to begin operations in 2025. The PDH-PP project is expected to have a capacity of 500 KTPA with integrated propylene production and an equivalent polypropylene plant.

Interestingly, this surge in share prices comes despite GAIL reporting a drop in revenue to ₹33,050 crore this week. However, the company's Q2 net profit did see a significant increase, rising 87% YoY and 36% sequentially to ₹2,442 crore from the previous quarter's ₹1,793 crore (INR100 crore = approx. USD12 million).

In light of these developments, Prabhudas Lilladher maintains a "Buy" rating on GAIL with a target price of ₹139.

InvestingPro Insights

InvestingPro's real-time data and tips provide insightful information about GAIL and BPCL's financial performance and potential.

For GAIL, InvestingPro Tips highlight that despite low earnings quality with free cash flow trailing net income, the company is a prominent player in the Gas Utilities industry and has maintained dividend payments for 24 consecutive years. This stability might explain the maintained investor confidence despite the reported drop in revenue.

For BPCL, InvestingPro Tips emphasize that the company yields a high return on invested capital and net income is expected to grow this year. This could be a contributing factor to the surge in share prices following the new deal announcement.

InvestingPro Data for GAIL shows a P/E Ratio of 14.86, indicating that the company's shares could be undervalued. The company's revenue for the last twelve months as of Q2 2024 stands at $16216.71 million. Meanwhile, BPCL's data shows a significantly lower P/E Ratio of 2.78, suggesting even more potential for growth. BPCL's revenue for the same period is a robust $54508.13 million.

These insights are derived from a plethora of additional tips and metrics available on InvestingPro. The platform offers useful data and tips for investors, assisting them in making informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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