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GAIL held its analyst meet today. The key takeaways from the same include:
** Capex: GAIL has planned capex of INR286bn (US$6.4bn) over the next
3 years - INR77bn in FY12, INR113bn in FY13 and INR96bn in FY14. Of this,
c40% would be spent on pipelines and c30% on petrochemicals.
** Pipeline projects: About 2000km of the pipeline expansion projects (DV-
PL, Vijaipur-Dadri, Dadri-Bawana, Chainsa-Jhajjar-Hissar) have been either
partially or fully commissioned in the last one year and another c4600km of
pipelines (Jagdishpur-Haldia, Dabhol-Bangalore, Kochi-Bangalore-Mangalore)
would be commissioned in a phased manner over the next three years.
** Petrochemical capacity expansion: GAIL commissioned its 6 th furnace
in Pata in Q4FY11 leading to increase in capacity to more than 450k tpa. It
plans to further increase this capacity to 900k tpa by CY14. It also said that
it plans to source additional gas for this capacity expansion from ONGC and
Petronet LNG's Dahej terminal.
** Dabhol LNG terminal (5mmtpa): GAIL expects it to be commissioned by
Feb 2012. However, breakwater facility will take another two years to com-
plete, without which it will have only a 40% utilisation rate. If this happens,
it will imply c8mmscmd upside to our India gas supply model for FY13, as
we have not considered this in our forecasts.
** Gas supply: GAIL expects additional gas supply of 45mmscmd (mainly
from KG D6) over the next two years. However, we believe that this is highly
unlikely given that we do not expect RIL to increase production from current
levels of c50mmscd for the next 2 years. Moreover, even ONGC has indicated
that production from its large KG-DWN-98/2 discovery is unlikely to
start before FY18.
** LNG imports: GAIL will be importing 1 LNG cargo every month in FY12.
It had imported 5 LNG cargoes in FY11. This implies c1.6mmscmd of incremental
LNG imports over last year.
Maintain Hold with INR480 TP
We rate GAIL a Hold as we expect gas supplies in India (including imports)
to grow at only a 4% CAGR over FY11-13. This will adversely impact GAIL's
pipeline utilisation and RoEs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GAIL held its analyst meet today. The key takeaways from the same include:
** Capex: GAIL has planned capex of INR286bn (US$6.4bn) over the next
3 years - INR77bn in FY12, INR113bn in FY13 and INR96bn in FY14. Of this,
c40% would be spent on pipelines and c30% on petrochemicals.
** Pipeline projects: About 2000km of the pipeline expansion projects (DV-
PL, Vijaipur-Dadri, Dadri-Bawana, Chainsa-Jhajjar-Hissar) have been either
partially or fully commissioned in the last one year and another c4600km of
pipelines (Jagdishpur-Haldia, Dabhol-Bangalore, Kochi-Bangalore-Mangalore)
would be commissioned in a phased manner over the next three years.
** Petrochemical capacity expansion: GAIL commissioned its 6 th furnace
in Pata in Q4FY11 leading to increase in capacity to more than 450k tpa. It
plans to further increase this capacity to 900k tpa by CY14. It also said that
it plans to source additional gas for this capacity expansion from ONGC and
Petronet LNG's Dahej terminal.
** Dabhol LNG terminal (5mmtpa): GAIL expects it to be commissioned by
Feb 2012. However, breakwater facility will take another two years to com-
plete, without which it will have only a 40% utilisation rate. If this happens,
it will imply c8mmscmd upside to our India gas supply model for FY13, as
we have not considered this in our forecasts.
** Gas supply: GAIL expects additional gas supply of 45mmscmd (mainly
from KG D6) over the next two years. However, we believe that this is highly
unlikely given that we do not expect RIL to increase production from current
levels of c50mmscd for the next 2 years. Moreover, even ONGC has indicated
that production from its large KG-DWN-98/2 discovery is unlikely to
start before FY18.
** LNG imports: GAIL will be importing 1 LNG cargo every month in FY12.
It had imported 5 LNG cargoes in FY11. This implies c1.6mmscmd of incremental
LNG imports over last year.
Maintain Hold with INR480 TP
We rate GAIL a Hold as we expect gas supplies in India (including imports)
to grow at only a 4% CAGR over FY11-13. This will adversely impact GAIL's
pipeline utilisation and RoEs.
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