Morgan Stanley Boosts ADNOC Gas Rating on Potential Strait of Hormuz Reopening

Morgan Stanley shifted gears on ADNOC Gas, moving its rating up to overweight from equal-weight, with a new price target of AED 4.20, up from AED 3.90. This change pivots on the possibility that the Strait of Hormuz, a vital artery for energy exports, might reopen.

The bank's analysts highlighted how ADNOC Gas is uniquely exposed to disruptions in this critical shipping lane. Roughly one-third of its export volumes and about two-thirds of its profits depend on LPG and LNG exports that typically transit the Strait.

Looking at the numbers, Morgan Stanley trimmed its FY26 revenue and EBITDA forecasts by about 8% each, citing ongoing limitations from the Strait's closure reducing production and sales. The share of export traded liquid sales compared to production is expected to dip substantially, falling from a full 100% to 70% and 50% in Q1 and Q2 of 2026, respectively.

On domestic gas, the forecast for Q1 and Q2 2026 production took a hit too, falling to 530 TBTU and 600 TBTU from previously projected 635 TBTU. This signals a clear volume crunch in the short term.

But don't count ADNOC Gas out just yet. Morgan Stanley boosted EBITDA projections for FY27 and FY28 by 9% and 5.1%, thanks to a more bullish take on Brent crude prices-expecting $80 a barrel in 2027 and $75 in 2028, up significantly from earlier $60 predictions.

Interestingly, the current ADNOC Gas share price reflects a scenario where LPG/LNG plants are operating at just 75% capacity or oil prices are stuck near $45 a barrel, leaving room for upside if things normalize faster.

Net income projections mirror this split picture, with an 11.4% cut anticipated for 2026 but a near 10% jump forecast for 2027. Morgan Stanley's base assumes a return to typical production and sales by Q3 2026, pegging Q1 2026 EBITDA at $1.69 billion and net income around $1.04 billion.

The updated price targets show a wider range: bullish at AED 5.90, base at AED 4.20, and bearish setting AED 2.60, raising the floor from prior estimates. It's clear the reopening of the Strait of Hormuz has a huge bearing on ADNOC Gas's outlook.