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UBS Investment Research
GAIL (India) Ltd.
R esults in line
Event: Q1FY12 results in line with expectations
GAIL’s Q1FY12 operational numbers threw no surprises. The company’s reported
PAT was in line with UBS and street expectations. The EBITDA (including other
income) for the quarter was Rs 16.2 bn vs UBSe of Rs 17.7bn and consensus
estimate of Rs 17.95 bn.
Impact: Positive on the margin
The reported EBIT from the gas trading business increased to Rs 3.1 bn from Rs
1.6 bn a year ago despite slightly lower gas volumes mainly because 1) last year’s
number included a Rs 1.1 bn provisional charge and 2) higher marketing margins
on spot cargo. We expect that the company will continue to benefit from the latter
for the rest of the year. Petchem EBIT fell 44% QoQ on lower domestic demand
for petrochemicals. Subsidy payment of Rs 6.8bn was as per expectation.
Action: Top pick in India gas space
Gas transmission volumes decreased slightly vs. the previous quarter to 117
mmscmd and we believe the company will exit the year with gas volumes of 124
mmsmd once the Dabhol LNG terminal comes online in the 4th quarter of this year.
This suggests some downside risk to our gas volume estimates but we believe the
company will be able to offset that with higher margins on spot cargoes.
Valuation: Maintain Buy rating with DCF based PT of Rs550/share
We value the company’s pipeline and petrochemicals operations on a DCF basis.
At 12.4x FY13E PE, the stock looks attractive. It is a play on higher gas demand in
India and we expect gas vols to increase from 118 to 134mmscmd over FY11-13.
GAIL (India) Ltd.
GAIL is India's principal gas transmission company and owns cross-country gas
pipelines. It is 57% owned by the Government of India (GoI). Gas tranmission is
a fixed returns business in India, which is regulated by the GoI. Its FY10
turnover was US$5.4bn.
Statement of Risk
We believe the risks to our estimates include the regulatory uncertainty in gas
supply and delay in the pipeline capex. A higher upstream subsidy payout poses
additional risk to GAIL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
GAIL (India) Ltd.
R esults in line
Event: Q1FY12 results in line with expectations
GAIL’s Q1FY12 operational numbers threw no surprises. The company’s reported
PAT was in line with UBS and street expectations. The EBITDA (including other
income) for the quarter was Rs 16.2 bn vs UBSe of Rs 17.7bn and consensus
estimate of Rs 17.95 bn.
Impact: Positive on the margin
The reported EBIT from the gas trading business increased to Rs 3.1 bn from Rs
1.6 bn a year ago despite slightly lower gas volumes mainly because 1) last year’s
number included a Rs 1.1 bn provisional charge and 2) higher marketing margins
on spot cargo. We expect that the company will continue to benefit from the latter
for the rest of the year. Petchem EBIT fell 44% QoQ on lower domestic demand
for petrochemicals. Subsidy payment of Rs 6.8bn was as per expectation.
Action: Top pick in India gas space
Gas transmission volumes decreased slightly vs. the previous quarter to 117
mmscmd and we believe the company will exit the year with gas volumes of 124
mmsmd once the Dabhol LNG terminal comes online in the 4th quarter of this year.
This suggests some downside risk to our gas volume estimates but we believe the
company will be able to offset that with higher margins on spot cargoes.
Valuation: Maintain Buy rating with DCF based PT of Rs550/share
We value the company’s pipeline and petrochemicals operations on a DCF basis.
At 12.4x FY13E PE, the stock looks attractive. It is a play on higher gas demand in
India and we expect gas vols to increase from 118 to 134mmscmd over FY11-13.
GAIL (India) Ltd.
GAIL is India's principal gas transmission company and owns cross-country gas
pipelines. It is 57% owned by the Government of India (GoI). Gas tranmission is
a fixed returns business in India, which is regulated by the GoI. Its FY10
turnover was US$5.4bn.
Statement of Risk
We believe the risks to our estimates include the regulatory uncertainty in gas
supply and delay in the pipeline capex. A higher upstream subsidy payout poses
additional risk to GAIL.
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