Strong performance by LPG segment driven by absence of subsidy burden boosts profit
GAIL’s Q2FY14 adjusted net profit of Rs13.3bn was in line with our estimate. As GAIL’s subsidy sharing was provisionally capped at Rs14bn (which it has already shared in H1FY), GAIL’s subsidy share during the quarter was meagre Rs13mn. Net revenues at Rs159.8bn registered a jump of 28.1% yoy mainly on account 51.4% increase in LPG and OLHC and 31.3% increase in gas trading revenues. GAIL’s gas transmission volume during the quarter declined by 8.6% yoy to 96mmscmd (qoq +1mmscmd) and continues to get affected due to fall in volumes from RIL’s KG D6. Gas transmission tariff increased by 35.1% yoy to Rs1,281/tcm. Petchem sales volume declined by 14.8% yoy (qoq +0.9%) while realizations increased by 24.2%/2.3% yoy/qoq. Petchem margin during the quarter declined by 566bps sequentially to 28.8% (yoy -1,088bps) due to high LNG cost and lower PMT supply. Gas trading segment’s EBIT during the quarter increased by 69.2% to Rs5.05bn as trading margin increased by 51.9% yoy to $0.32/mmbtu.
Valuation and view
In the near term, we believe that concerns relating to lack of growth in GAIL’s key gas transmission segment would continue to be an overhang on the stock. The increase in APM gas price would negatively impact GAIL’s petchem business while lack of gas supply from RIL’s KG D6 would affect its LPG extraction business. However (the likely) exemption of GAIL from subsidy sharing mechanism would help abate the impact of higher APM gas price as can be seen from result of the current quarter. We believe this would eliminate GAIL’s dependence on adhoc government policies with respect to sharing of subsidy burden.
We maintain our NEUTRAL rating on GAIL with SOTP based price target of Rs360. At the CMP, the stock is trading at 9.5x and 6.6x FY15e earnings and EV/EBITDA respectively.
Actual v/s Estimates
| Y/E, Mar (Rs. m) |
Q3FY14
|
Q2FY14
|
qoq (%)
|
Q3FY13
|
yoy (%)
|
LKP Estimates
|
Deviation (%/bps)
|
| Revenue |
159,806
|
139,446
|
14.6%
|
124,743
|
28.1%
|
148,650
|
7.5%
|
| EBITDA |
22,317
|
14,055
|
58.8%
|
19,722
|
13.2%
|
22,214
|
0.5%
|
| EBITDA (%) |
14.0%
|
10.1%
|
389 bps
|
15.8%
|
-184 bps
|
14.9%
|
-98 bps
|
| APAT |
13,345
|
9,157
|
45.7%
|
12,849
|
3.9%
|
13,221
|
0.9%
|
| RPAT |
16,794
|
9,157
|
83.4%
|
12,849
|
30.7%
|
13,221
|
27.0%
|
No comments:
Post a Comment