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We raise FY12/13E earnings, as we factor in lower subsidy
sharing and resilient petchem earnings, which offset the
cut in gas transmission volume.
Weak domestic supplies are likely to act as headwind for
transmission volume in the medium term; however,
marketing margins on spot LNG supports near-term
earnings even as long-term prospects for “affordable” LNG
are improving.
High prices for polymers and liquid hydrocarbons, in line
with strong crude price, add to the bottom line.
Maintain Outperform.
No respite from weak domestic gas supplies. We expect
GAIL’s transmission volume to face headwinds given falling
volume at RIL’s KG-D6 partly made up by increased LNG
imports. Accordingly, we moderate our FY12/13E volumes
to 123/129mmscmd vs. 133/146mmscmd assumed earlier.
Even as transmission volumes come off, we expect GAIL to
earn handsome marketing margins on spot LNG imports.
But lower under-recovery adds to earnings… We have
moderated GAIL’s FY12/13E subsidy contribution to
Rs27/18bn vs. Rs32/24bn assumed earlier for the same
period. We have also toned down GAIL’s share within
upstream to 7% (FY11 avg.) vs. 7.7% earlier; the company’s
share was ~5% for 1Q.
…and crude-linked revenues holding firm. Petchem
earnings will get support as stable prices and volume ramp
up on the back of industry restocking resumes. In line with
rising crude prices, liquid hydrocarbon realisation has
increased significantly, thereby supporting earnings. 1Q
petchem volumes were impacted by destocking given price
volatility, which is likely to correct in the coming quarters.
Earnings raised, PT maintained. We have raised
FY12/13E earnings by 22%/8% as petchem/liquid earnings
offset the impact of lower gas volumes. However, DCF
based PT remains unchanged at Rs508 as we factor in
(i) delayed ramp-up to “fully-evolved EBITDA” by March-19E
(vs. Mar-16E) on weaker domestic gas supply outlook and
(ii) higher WACC. Maintain Outperform
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We raise FY12/13E earnings, as we factor in lower subsidy
sharing and resilient petchem earnings, which offset the
cut in gas transmission volume.
Weak domestic supplies are likely to act as headwind for
transmission volume in the medium term; however,
marketing margins on spot LNG supports near-term
earnings even as long-term prospects for “affordable” LNG
are improving.
High prices for polymers and liquid hydrocarbons, in line
with strong crude price, add to the bottom line.
Maintain Outperform.
No respite from weak domestic gas supplies. We expect
GAIL’s transmission volume to face headwinds given falling
volume at RIL’s KG-D6 partly made up by increased LNG
imports. Accordingly, we moderate our FY12/13E volumes
to 123/129mmscmd vs. 133/146mmscmd assumed earlier.
Even as transmission volumes come off, we expect GAIL to
earn handsome marketing margins on spot LNG imports.
But lower under-recovery adds to earnings… We have
moderated GAIL’s FY12/13E subsidy contribution to
Rs27/18bn vs. Rs32/24bn assumed earlier for the same
period. We have also toned down GAIL’s share within
upstream to 7% (FY11 avg.) vs. 7.7% earlier; the company’s
share was ~5% for 1Q.
…and crude-linked revenues holding firm. Petchem
earnings will get support as stable prices and volume ramp
up on the back of industry restocking resumes. In line with
rising crude prices, liquid hydrocarbon realisation has
increased significantly, thereby supporting earnings. 1Q
petchem volumes were impacted by destocking given price
volatility, which is likely to correct in the coming quarters.
Earnings raised, PT maintained. We have raised
FY12/13E earnings by 22%/8% as petchem/liquid earnings
offset the impact of lower gas volumes. However, DCF
based PT remains unchanged at Rs508 as we factor in
(i) delayed ramp-up to “fully-evolved EBITDA” by March-19E
(vs. Mar-16E) on weaker domestic gas supply outlook and
(ii) higher WACC. Maintain Outperform
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