Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Gas Authority of India (GAIL.BO)
Buy Equity Research
Above expectations: Extant assets, likely tariff hikes provide edge
What surprised us
GAIL reported 2QFY12 net profit of Rs10.9 bn, up 19% yoy and above our
and Bloomberg expectation of Rs9.4bn/Rs10.3bn respectively. This was
mainly on account of stronger than expected petchem results, as well as
higher gas transmission volumes and tariffs. Petchem division recorded
sales at 129,000 tonnes, up 46% qoq and segment EBIT of Rs4bn, up 66%
qoq. Gas transmission volumes at 119mmscmd were higher vs. GS
estimate of 117.5mmscmd and vs. 1QFY12 volumes of 117.2mmscmd.
Average transmission tariffs at Rs 905/’000scm were up 3% qoq. We note
that subsidy burden for the quarter was Rs5.7 bn vs. Rs6.8bn in 1QFY12.
What to do with the stock
We believe GAIL is the best positioned company in the Indian gas space
owing to its incumbent national network and strong balance sheet that can
support robust growth initiatives. We look for GAIL’s incumbent assets to
benefit from any possible increase in difficulty in the obtainment of Right
of Use of land for new pipelines. Also, we believe that transmission tariffs
for GAIL could improve next year by 10%-15%, as average transmission
volumes have been lower than earlier assumptions used for tariff
determination. Apart from GAIL being a key beneficiary of the structural
theme of rising gas volumes (domestic and imported) in India, we think
the market has not priced in the likely bottoming of the petrochemical
cycle in FY12. We maintain our Buy rating on GAIL with a 12-m DCF-based
TP of Rs520, implying potential upside of 22%. Key risks: Delay in pipeline
projects, weak petchem margins and potential higher subsidy burden.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Gas Authority of India (GAIL.BO)
Buy Equity Research
Above expectations: Extant assets, likely tariff hikes provide edge
What surprised us
GAIL reported 2QFY12 net profit of Rs10.9 bn, up 19% yoy and above our
and Bloomberg expectation of Rs9.4bn/Rs10.3bn respectively. This was
mainly on account of stronger than expected petchem results, as well as
higher gas transmission volumes and tariffs. Petchem division recorded
sales at 129,000 tonnes, up 46% qoq and segment EBIT of Rs4bn, up 66%
qoq. Gas transmission volumes at 119mmscmd were higher vs. GS
estimate of 117.5mmscmd and vs. 1QFY12 volumes of 117.2mmscmd.
Average transmission tariffs at Rs 905/’000scm were up 3% qoq. We note
that subsidy burden for the quarter was Rs5.7 bn vs. Rs6.8bn in 1QFY12.
What to do with the stock
We believe GAIL is the best positioned company in the Indian gas space
owing to its incumbent national network and strong balance sheet that can
support robust growth initiatives. We look for GAIL’s incumbent assets to
benefit from any possible increase in difficulty in the obtainment of Right
of Use of land for new pipelines. Also, we believe that transmission tariffs
for GAIL could improve next year by 10%-15%, as average transmission
volumes have been lower than earlier assumptions used for tariff
determination. Apart from GAIL being a key beneficiary of the structural
theme of rising gas volumes (domestic and imported) in India, we think
the market has not priced in the likely bottoming of the petrochemical
cycle in FY12. We maintain our Buy rating on GAIL with a 12-m DCF-based
TP of Rs520, implying potential upside of 22%. Key risks: Delay in pipeline
projects, weak petchem margins and potential higher subsidy burden.
No comments:
Post a Comment