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2QFY12 net profit of Rs10.9bn (+18% yoy) was in line with our estimates. With FY12 end gas
transmission capacity expected to be 220mmscmd, gas sourcing is likely to remain key longerterm
concern, given lack of clarity on growth in domestic gas supplies.
PAT in line with our estimates
GAIL reported 2QFY12 PAT of Rs10.9bn (+18% yoy, +11% qoq) which was in line with our
estimates. While EBITDA was 5% below us, higher other income and lower tax rate kept net
profit in line. Segment wise, LPG EBIT (+101% yoy) was significantly ahead of us primarily
due to higher volumes. This was however offset by weaker performance in the core gas
transmission segment.
LPG and allied hydrocarbons segment
Segment EBIT at Rs 3.5bn (+101% yoy, highest in last six quarters) was 89% higher than our
estimates primarily due to higher volumes. Segment volumes of 379kt (+9% yoy) were 10%
ahead of us and gross realisations were 4% higher than our expectations (+31% yoy).
GAIL’s subsidy burden in 2QFY12 was Rs5.7bn versus our expectation of Rs5.9bn. Overall,
upstream share in 2Q has been kept at 33% of gross industry under recoveries which is in
line with our working assumption for the quarter. Within upstream, GAIL’s share has jumped
to 8% from 4.7% in 1QFY12 as GAIL contributes only towards cooking fuel under recoveries
which have not benefited from the cut in customs duty on crude and excise duty on diesel,
announced by GOI on June 25, 2011. However for the full year we have taken a more
cautious view on upstream share. We believe that the upstream companies would not benefit
from the duty cuts. Consequently we forecast upstream share at 35% of reported downstream
under recoveries plus the customs and excise cut benefits. This leads to effective upstream
share of 49% of the reported under recoveries in FY12 .
Gas transmission segment
Segment EBIT of Rs5.6bn (-23% yoy) was 21% below our estimates due to higher than
expected depreciation. Transmission volumes at 119mmscmd(+4% yoy) were in line with our
estimates. During the quarter, the company imported 4 spot LNG cargoes which seems to
have partly compensated the qoq decline in KGD6 gas production
GAIL expects to have pipeline capacity of 220mmscmd by end FY12. With rising pipeline
capacity, sourcing additional gas will remain key management challenge in the medium term.
Segment profits are likely to remain under pressure going forward as low visibility on new gas
supplies would lead to under utilization of new pipelines, in our view.
Gas trading segment
Segment EBIT of Rs2.9bn (+79% yoy, -8% qoq) was 4% below our estimates, possibly due to
lower marketing margins on spot LNG cargoes.
Petrochemical segment
Petchem segment EBIT of Rs4bn (+49% yoy) was 20% below our expectation even though
sales volumes were marginally ahead of us. We believe the underperformance could be due
to higher cost of gas internally consumed. While production was flat qoq, petchem sales
jumped 47% as the inventory build up in the previous quarter has eased in 2QFY12.
Other issues
GAIL management stated that it plans to operationalise the Dabhol LNG terminal from
4QFY12 and initial cargoes could come from the third week of January 2012.
The company plans to spend capex of about Rs72bn during FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QFY12 net profit of Rs10.9bn (+18% yoy) was in line with our estimates. With FY12 end gas
transmission capacity expected to be 220mmscmd, gas sourcing is likely to remain key longerterm
concern, given lack of clarity on growth in domestic gas supplies.
PAT in line with our estimates
GAIL reported 2QFY12 PAT of Rs10.9bn (+18% yoy, +11% qoq) which was in line with our
estimates. While EBITDA was 5% below us, higher other income and lower tax rate kept net
profit in line. Segment wise, LPG EBIT (+101% yoy) was significantly ahead of us primarily
due to higher volumes. This was however offset by weaker performance in the core gas
transmission segment.
LPG and allied hydrocarbons segment
Segment EBIT at Rs 3.5bn (+101% yoy, highest in last six quarters) was 89% higher than our
estimates primarily due to higher volumes. Segment volumes of 379kt (+9% yoy) were 10%
ahead of us and gross realisations were 4% higher than our expectations (+31% yoy).
GAIL’s subsidy burden in 2QFY12 was Rs5.7bn versus our expectation of Rs5.9bn. Overall,
upstream share in 2Q has been kept at 33% of gross industry under recoveries which is in
line with our working assumption for the quarter. Within upstream, GAIL’s share has jumped
to 8% from 4.7% in 1QFY12 as GAIL contributes only towards cooking fuel under recoveries
which have not benefited from the cut in customs duty on crude and excise duty on diesel,
announced by GOI on June 25, 2011. However for the full year we have taken a more
cautious view on upstream share. We believe that the upstream companies would not benefit
from the duty cuts. Consequently we forecast upstream share at 35% of reported downstream
under recoveries plus the customs and excise cut benefits. This leads to effective upstream
share of 49% of the reported under recoveries in FY12 .
Gas transmission segment
Segment EBIT of Rs5.6bn (-23% yoy) was 21% below our estimates due to higher than
expected depreciation. Transmission volumes at 119mmscmd(+4% yoy) were in line with our
estimates. During the quarter, the company imported 4 spot LNG cargoes which seems to
have partly compensated the qoq decline in KGD6 gas production
GAIL expects to have pipeline capacity of 220mmscmd by end FY12. With rising pipeline
capacity, sourcing additional gas will remain key management challenge in the medium term.
Segment profits are likely to remain under pressure going forward as low visibility on new gas
supplies would lead to under utilization of new pipelines, in our view.
Gas trading segment
Segment EBIT of Rs2.9bn (+79% yoy, -8% qoq) was 4% below our estimates, possibly due to
lower marketing margins on spot LNG cargoes.
Petrochemical segment
Petchem segment EBIT of Rs4bn (+49% yoy) was 20% below our expectation even though
sales volumes were marginally ahead of us. We believe the underperformance could be due
to higher cost of gas internally consumed. While production was flat qoq, petchem sales
jumped 47% as the inventory build up in the previous quarter has eased in 2QFY12.
Other issues
GAIL management stated that it plans to operationalise the Dabhol LNG terminal from
4QFY12 and initial cargoes could come from the third week of January 2012.
The company plans to spend capex of about Rs72bn during FY12.
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