GAIL (India) Ltd. share price target

GAIL reported robust results in 1QFY17 led by improved profitability in gas trading and petrochemical segment. EBITDA was at Rs 15.9bn (+54% YoY) and APAT was at Rs 8.5bn (+65%). RPAT was higher at Rs 13.4bn including profits of Rs 4.9bn from partial divestment of its stake in MGL.The past two years have been challenging for GAIL given the fall in gas volumes and lower profits in petchem/LPG segment (lower realisation and higher feed cost).

A turnaround is expected in FY17 led by (1) Lower RLNG/domestic gas prices, which will improve profitability of petchem/LPG, (2) Rise in crude prices as the petchem/LPG realisations will rise in sync. Gas costs will remain muted owing to the global glut, (3) Increase in gas transmission volumes on account of power pooling and higher demand at the petchem plant, (4) Likely upward revision in network tariff, and (4) Strong marketing margins at lower gas prices.They see structural improvement across all segments. And  their SOTP target is Rs 475/sh (~7.2x FY18E standalone EV/EBITDA and Rs 110/sh from investments).

Gail reported Q1FY17 numbers, which came in higher than our estimates. Revenues declined 13.6% YoY to | 10851.8 crore and were lower than our estimate of revenue of | 16110.1 crore mainly on account of lower gas costs. EBITDA increased 52.6% YoY to | 1593.3 crore and came in above our estimate of | 1304.8 crore mainly due to higher-than-expected natural gas transmission, natural gas trading and petrochemicals segment EBIT .Subsequently, PAT during the quarter increased 2.1x YoY to | 1335.2 crore (our estimate: | 686.8 crore). Higher-than-expected other income at | 605.4 crore (due to the Mahanagar Gas stake sale) vs. our estimate of | 220 crore contributed to reported PAT.

Outlook and Valuation : Gail India has received six tariff revisions till Q1FY17. Also, it is awaiting tariff revision for five other pipelines (including HVJ pipeline). Positive judgement by APTEL, tariff revision for major pipelines and restoring gas volumes to higher levels would serve as key triggers for the stock. Stabilisation of the petchem business would be an important factor to watch for the stock, going ahead. They have valued the company using the SOTP methodology, valuing the core business using DCF and assigning a target multiple to the EBITDA of other business segments. They have a BUY recommendation on Gail with a target price of | 475.

GAIL's reported 1QFY17 EBITDA was above our estimate at INR15.7b (est INR13.2b; +58% YoY; +41% QoQ) led by (a) higher gas trading gains and (b) one- time tariff revision gain of INR800m. Reported PAT was boosted due to one-time gain of INR4.9b from the stake sell of MGL through IPO. Adjusted for MGL gain, adj. PAT stood at INR8.5b (vs est. of INR6.6b; +99% YoY, +10% QoQ)....

ICICI Securities Ltd | Retail Equity Research Gail reported Q4FY16 numbers that were operationally largely in line with our estimates. The topline declined 17.8% YoY to | 11732.4...

PNGRB has set KG basin tariff (in INR/mmbtu) at 5.6/5.6/45.3 vs GAIL's demand of 5.6/181/181 for FY09-15/FY16/FY17 respectively. However, as the current economic life of this network ends in FY17,...

GAIL reported strong results led by exceptionally higher profits in the gas trading business. Margins increased to Rs 0.69/scm (vs. 0.29 QoQ and 0.08 YoY), EBITDA came in at Rs 11.6bn ( 17% YoY) and PAT was Rs 6.6bn ( 19% YoY).

Gail reported a weak set of numbers for 2QFY2016 with the EBITDA coming in 18% below our estimate. While overall volumes were in line with our expectations, petchem volumes surprised positively, increasing by 68% qoq. The revenue for the quarter, at Rs14,165cr, is in line with our estimate of Rs14,271cr. Gas trading realisations declined 4% yoy but increased 6% sequentially. In Petchem, increase in volumes were partially offset by 8% dip in realisations. Gas transmission revenues posted a strong growth of 15% qoq led by a 3% qoq_increase in volumes and 10% qoq_jump in realisations. The EBITDA declined 58% yoy to Rs844cr and is 17% below our estimate of Rs1,022cr. The sharp decline was on account of lower profitability across segments excluding the gas transmission business. EBITDA loss in the Petchem segment continued to worsen led by unavailability of low priced gas. Depreciation and interest expenses jumped 36%/79% yoy led by the commissioning of the new facilities at Pata. Other income increased, led by dividend income of Rs163cr. The Net profit declined 66% yoy to Rs441cr, 18% below our estimate of Rs536cr. Outlook and valuation We expect petchem volumes to drive revenues going forward. However, with crude prices to remain...

GAIL reported weak results led by : (1) Lower profits in petchem/LPG owing to lower realisations, usage of LT RLNG as RM and plant shutdown (2) Muted gas transmission volumes led by lower offtake of RLNG.