No respite GAIL ::HDFC Sec, report

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GAIL (India): Sell :: Business Line

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Beats estimates on nil subsidy payment… • Gail :: ICICI Securities, PDF link

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Gail (India) Ltd. | Q2FY15 Result Update | Net profit was boosted by nil subsidy burden, however operational performance was muted, change our rating from BUY to Hold:: IndiaNivesh

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Gail India - Q3FY14 Result Update: LKP

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%

GAIL (India): BUY :: Business Line

Technicals:: EID Parry, Carborundum, Aries Agro, BGR Energy Systems, A2Z Maintenance, GAIL, Crisil :: Business Line

 

GAIL: Gas transmission exit rate for FY13E pegged at 115mmscmd :; Centrum

Gas transmission exit rate for FY13E pegged at
115mmscmd
GAIL reported weak performance during Q2 marred by lower gas
transmission volumes, provisioning for change in LPG transmission tariffs,
lower petchem sales and higher subsidy burden. Lower KG D6 volumes,
coupled with lower off take from power producers, led to 3.5% QoQ decline in
gas transmission volumes at 106.0mmscmd from 109.8mmscmd in Q1.
Subsidy burden jumped by 38.7% YoY and 12.2% QoQ at Rs7.9bn. Higher
other income somewhat supported profitability and hence GAIL reported
10.0% YoY and 13.1% QoQ drop in bottom line at Rs9.9bn. The management
indicated an exit rate for gas transmission volumes for FY13E at 115mmscmd
which would support performance going ahead.
Rupee depreciation, higher petchem realisations lead to higher
revenues: GAIL’s revenues jumped by 17.1% YoY and 2.5% QoQ at Rs113.9bn
owing to rupee depreciation and higher petchem realisations.
Provisioning for revision in LPG transmission tariffs impacts
performance: Revision in LPG transmission tariffs by the PNGRB regulator led
to provisioning of Rs1.2bn thus leading to dismal performance. Even natural
gas transmission volumes suffered due to the decline in KG D6 volumes and
lower off take from power producers. Nonetheless, average transmission
tariffs were better at Rs936/’000scm compared to Rs857/’000scm in Q1.
Petchem realisations and sales supported the performance which improved
sequentially by 1.6% at Rs86,634/ton from Rs85,303/ton in Q1 and
101,000tons from 66,000tons in Q1 respectively.

Technical: Power finance corp, VIP Industries, Marico, Greaves Cotton, GAIL, HCL::Business Line

LKP LIKES : GAIL (Buy, Target Rs.430)

GAIL (Buy, Target Rs.430)

·      Inspite of a steady decline in gas production from KG D6, GAIL’s gas transmission volumes have remained stable since Q4FY10 mainly on account of LNG imports which have increased to meet the fall in domestic gas supplies. GAIL is investing around Rs67bn over the next three years to increase its capacity from 180mmsmcd to 300msmcd. GAIL plans to expand its pipeline network from 9,500kms to 14,000kms with expansions planned in Southern and Eastern India, which are outside of GAIL’s current strong areas of Northern and Western India.

·      GAIL’s gas transmission volume growth has taken a hit on account of declining gas production from KG D6. We estimate GAIL’s gas transmission volume for FY13e/FY14e at 116/121mmscmd but expect back ended volume growth post 2015 when the gas supplies increase on account of increasing LNG imports and production from new gas fields. We estimate gas transmission tariff at Rs904/ Rs962/tcm for FY13e/FY14e.

GAIL plans to invest Rs69bn over FY13e-15e in its petchem business. We are positive on GAIL’s move to increase its petchem capacity at Pata to 900ktpa by FY15e as it will enable GAIL to capitalize on domestic demand for petrochemicals which we expect to revive in FY14e. The recent decision by the government to cap LPG cyclinders per household at 6 bodes well for GAIL as it would lead to a fall in subsidy burden of GAIL. BUY GAIL trading at 9x expected one year forward earnings with a price target of Rs430.

GAIL (India): Buy: Business Line

Sizzling Stocks - TCS , GAIL::Business Line

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Sizzling Stocks - TCS

  

Last week, the stock's significant long-term support at Rs 1,060 arrested its decline from the 52-week high registered in late February 2012 at Rs 1,279. Triggered by slightly better than expected March 2012 quarter results and positive divergence in the daily relative strength index, the stock rebounded strongly. It zoomed 10.4 per cent with extraordinary volumes for the week. The stock has conclusively breached its 200-day moving average and is hovering well above it. However, it is facing key long-term resistance at Rs 1,240. An emphatic breakthrough of this resistance will take the stock higher to Rs 1,279 and to 1,300 in the medium-term.

Conversely, inability to surpass Rs 1,240 can pull the stock down to Rs 1,130 and then to Rs 1,102 levels. Next important support is at Rs 1,060. A decisive fall below this level will strengthen bearish momentum and pull the stock down to Rs 1,000 in the medium-term.

GAIL India (Rs 331)

The stock tumbled 8.5 per cent decisively breaking through a key long-term support level of Rs 350 in the previous week. This decline has reinforced the stock's intermediate-term downtrend that has been in place from January 2011 peak of Rs 535. Moreover, the stock's long-term uptrend that was in place since October 2008 has been mitigated. The weekly relative strength index is featuring in the bearish zone and the monthly RSI has entered this zone. The stock is hovering way below its 50 and 200-day moving averages. It can prolong its downtrend and test support at Rs 309 and then Rs 280 in the medium-term.

Key resistances are at Rs 350, Rs 383 and then Rs 400. Only a strong rally above Rs 440 will alter the stock's downtrend and take it higher to Rs 475 in the long-term.

GAIL (India): Some gas finally :: Kotak Securities PDF link

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily19042012.pdf


Company
Sun Pharmaceuticals: Prandin launch still some time away
GAIL (India): Some gas finally
Muthoot Finance: Market price factors in sharp loan de-growth
Sobha Developers: Increasing visibility of cash flows

GAIL (India) :Growth Potential in ‘Pipeline’ : Nirmal Bang

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Growth Potential in ‘Pipeline’
GAIL faces a litany of woes such as declining gas supply, possibility of a limit on
marketing margin, irrational bidding for new pipelines and rising upstream
subsidy burden. We believe the risk-reward ratio is quite favourable with limited
downside risk as its stock price is just 8% away from our worst-case scenario
target. We assign Buy rating to GAIL with a target price of Rs427.

Gail India Ltd. Gas supply a worry but FY12 subsidy may be as expected 􀂄 :: BofA Merrill Lynch

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Gail India Ltd.
Gas supply a worry but FY12
subsidy may be as expected
􀂄 Twin worries of gas shortage and rising subsidy
GAIL’s 9M FY12 EPS factoring the actual subsidy (under-provision in 3Q) is up
just 6% YoY. In 9M, GAIL was hit by flat gas transmission volume and 75% YoY
rise in subsidy. GAIL’s volume growth was capped by gas output from the KG D6
block declining sharply. There was a concern that share in subsidy of GAIL and its
upstream peers, which was 37.9% in 9M FY12, may go up further in FY12.
However, now no further negative surprise on subsidy appears likely in FY12.
Gas supply and subsidy would remain worries for FY13. Retain Underperform.
Gas supply shortage to continue; will margins be capped?
GAIL’s 9M FY12 gas transmission volume is up just 1% YoY. Its FY12 volumes
are likely to be flat. Reliance Industries (RIL) has guided decline in KG D6 gas
volume by 15.5mmscmd in FY13. LNG imports (capacity constraints) would not
be able to make up for fall in output. Thus GAIL’s gas volume may remain flat
even in FY13. GAIL’s gas transmission and trading EBITDA is up 10% YoY in 9M
FY12 despite flat volume boosted by marketing margins on LNG imports. There is
a risk (low in our view) that marketing margins on LNG imports could get capped.
FY12 subsidy may be as expected; 3Q shortfall in 4Q
The subsidy provision in the FY13 budget is at the higher end of our expectation
at Rs400bn. If it was lower than expected there was risk that GAIL and its
upstream peers may have to bear more subsidy than as per 9M formula (38%).
Thus no further negative surprise on subsidy is likely, which means GAIL’s FY12E
EPS may be up 11% YoY as expected. However, GAIL had under-provided
subsidy by Rs3.35bn in 3Q, which it will have to account in 4Q. We expect GAIL’s
FY12 subsidy to be 40% YoY up at Rs29.5bn.

GAIL (India): Buy ::Business Line

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GAIL (India): Not enough gas in the tank ::Kotak Securities (PDF link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29022012.pdf

GAIL (India): Not enough gas in the tank
` Lower transmission volumes to reflect decline in domestic gas supply
` Downgrade to ADD with a revised SOTP-based target price of Rs435 (Rs485
previously)
` Revise earnings for lower gas transmission volumes and higher crude prices

GAIL N: Earnings resilient but decelerating; lower TP  HSBC Research,

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GAIL
N: Earnings resilient but decelerating; lower TP
 Earnings likely to be resilient but historical c20% EPS CAGR is
likely to moderate to c8% over FY12-14e, in our view
 We expect the uncertain subsidy burden and potential
regulation of marketing margins to cloud the outlook
 We retain Neutral rating but reduce our TP from INR500 to
INR405 to account for lower volumes and higher subsidy

GAIL :: JP Morgan India Investor Tour

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GAIL
We met GAIL’s senior management team recently. Key highlights:
Transmission volumes: GAIL remains confident that growth in gas availability will
drive transmission volumes in the next 3-4 years - GAIL expects volumes to rise
from current levels (118mmscmd) to 225-250mmscmd over the next 3-4 years.
Drivers for the increase, in the company’s view would be: (1) RIL ramping back up
to 60mmscmd (+15mmscmd over current levels), (2) 20-25 mmscmd from ONGC,
(3) Increasing LNG imports, particularly with the commissioning of the Kochi and
Dabhol terminals and (4) ~25mmscmd from other NELP blocks.
Capex/Expansion plans: The company has a capex plan of Rs450bn upto FY16 –
excluding the Rs150bn already spent on pipelines. The company plans to spend
c.Rs170bn on its pipeline network/CGD ventures; Rs80-90bn on the petrochemical
expansion at Pata; Rs100bn on new JVs, including the Dabhol terminal; Rs30bn on
its E&P initiatives, with the rest earmarked for M&A. The company expects to
maintain a 1:1 gearing ratio post these expansions.
Concern on returns: The company addressed investor concerns on incremental
returns from projects without the 12% ROCE assurance – the management continues
to target 12-14% returns from all new pipeline projects. The Surat-Paradip pipeline
was won through competitive bidding, though the company expects to earn ~15%
ROCE on the same. On the Brahmaputra Cracker project—53% (Rs88bn) is capital
subsidy from the GoI.
Execution delays: The management highlighted some of the delays/problems faced
in the execution of pipeline projects – while GAIL usually gets support from local
administration, delays are sometimes seen. GAIL is however exempt from the land
acquisition act as the pipeline projects are longitudinal and land is returned to
original owners. The Jagdishpur-Haldia pipeline, is on hold, due to lack of gas from
the KG-D6 field, but the company is mulling restarting the same now.
Subsidies: The management felt the upstream share of subsidies for this fiscal year
will remain at 33% , and that the final share for last year (38.7%) was an aberration.
However, with elevated crude levels, the overall subsidy bill is very high, and the
management feels changes to the mechanism is needed – with aid being given only to
those who are in need.
Inter-PSU investments: The management was of the view that inter-PSU
divestment is a real possibility – with oil PSUs having made gains in the last such
round. However, they did point out that with its large capex plans, and subsidy
payouts, GAIL does not have much spare cash to participate in such a divestment.

Consider short strangle on Infosys, shorting Gail :: Business Line

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Infosys: Infosys is likely to move in a sideways range of Rs 2,550-2,850 in the short term. Only a break from this range will send a clear trend for the counter. A close above Rs 2,850 will lift the stock to Rs 2,974 initially and to Rs 3,105. On the other hand, a fall below Rs 2,500 will weaken the stock sharply to Rs 2,250.

F&O pointers: The stock witnessed short accumulation on Friday. The futures closed at a discount to the spot price. Cost of carry is negative, indicating that traders are not willing to carry over long positions, while option trading indicates a slightly positive bias — calls saw marginal unwinding of open interest, 2700 put witnessed heavy accumulation of open interest. This indicates a strong support for Infy at that level.

Strategy: Traders could consider a short strangle on Infosys. This can be initiated by selling 2,650 put and 2,850 call. They have closed at Rs 32.55 and Rs 14.50 respectively. Short strangle strategy is best suited when one considers the underlying stock is likely to move in a narrow range. While maximum profit is the premium collected, the loss could be unlimited if Infosys moves sharply in one direction i.e. either up or down. Besides, writing option involves high margin commitments. So this strategy is for traders who can afford to stomach high risks.

Traders can consider holding the position till expiry. Maximum profit will occur if Infosys settles between the strike prices at the time of expiry.

Gail India: After touching its all-time high in January this year, Gail India has been struggling to find its winning ways. The immediate-term outlook remains negative for Gail India. Only a close above Rs 467 will change the outlook to positive for the stock. The stock finds an immediate resistance at Rs 398 and the next at Rs 427.

Gail India finds a crucial support at Rs 343 and a close below that will drag it to Rs 283. Immediate support appears at Rs 366.

F&O pointers: Gail India futures ended with higher discount with respect to the spot close, signalling the existence of short positions. Options are not active on Gail India.

Strategy: Consider shorting Gail India Dec futures with tight stop loss at Rs 398 (closing day basis, spot price) for an initial target of Rs 343. Shift the stop-loss to Rs 366 if the stock dips below that level.

Follow-up: We advised a short straddle on Reliance Power 85-strike, expecting a narrow movement. However, the stock weakened sharply last week and pushed the position to out-of-money. Traders could exit from this. We had also recommended a short on BGR Energy. Though the stock opened last week on positive note, it could not sustain the gains and fell sharply as expected. Traders who entered the counter can hold on to the position with a revised stop loss of Rs 232 for the recommended target.