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GAIL (India), a leading gas transmission company, is aggressively expanding its pipeline network and plans to
invest more than Rs30,000 crore over FY2010-14 in a phased manner to double its gas pipeline network to over
14,000km and its transmission capacity to around 300mmscmd. This provides strong revenue visibility in its core
gas utilities business.
We also see value accretion from doubling of the petrochemical capacity by FY2014, and from the exploration
and production (E&P) and city gas distribution (CGD) businesses going forward.
A higher than expected fuel subsidy burden and regulatory risk in its core transmission business are the key
risks for the company.
Despite the subsidy burden, the strong growth visibility in its core gas transmission business would drive its
earnings.
At the current market price, the stock trades at a PE of 13.3x and enterprise value (EV)/EBITDA of 9.0x based
on our FY2013 estimates. We have a Buy recommendation on the stock with a price target of Rs541
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