GAIL (India) Ltd. share price target

4 March 2020 Oil & Gas The company organized a visit to its Horizontal Directional Drilling (HDD) Site at Damodar river, Durgapur along with interaction with the senior management. Phase-1 of 753km from Phulpur to Dobhi, connecting Gorakhour, Patna and Barauni has already been commissioned along with the six Geographical Areas (GAs) on this length. Phase-II of 901km connecting Dobhi to Durgapur and Dhamra to Angul is expected to be completed by Dec20. Phase-III of 1,001km from Bokaro- Angul and Durgapur-Kolkata is also expected to be completed by Dec20. Barauni-Guwahati pipeline of 716km is expected to be completed by Dec21. Matix was already commissioned but had to stop as it did not receive the minimum quantity of natural gas sufficient to keep the operations running. GAIL is in the process of completing the ~1.5km HDD stretch across Damodar river, post which, Matix would be able to receive gas from GAIL.

GAIL (India) Ltd is India's flagship natural gas company integrating all aspects of the natural gas value chain including exploration and production, processing, transmission, distribution and marketing and related services. The company today has reached new milestones with their strategic diversification into petrochemicals, telecom and liquid hydrocarbons, besides gas infrastructure. They have also extended their presence in power, liquefied natural gas re-gasification, city gas...

We remain constructive on GAIL as the risk/reward is favorable. India will derive higher benefit from the low LNG prices as the domestic natural gas ecosystem (CGD network, RLNG terminals, pipelines, revamp of fertiliser plants) develops. New US liquefaction terminals will boost RLNG exports and also keep Henry Hub (HH) prices subdued, enabling GAIL to swap cargoes. Thus, US LNG is not a concern. Maintain BUY. We maintain BUY on GAIL following a performance in-line with our PAT estimates in 3QFY20. Our target price is Rs 190/sh (6.0x Dec-21E EV/e for the stable Gas and LPG transmission business, 5.0x EV/e for the volatile gas marketing business, 6.5x EV/e for the cyclical petchem and LPG/LHC business, Rs 42 for investments and Rs 11 for CWIP) versus the consensus TP of Rs 168.

Gail India reported a mixed set of Q3FY20 numbers. The profitability of gas transmission & gas trading came in above our estimates on an operational basis while LPG segment results were below our estimates. Revenues for the quarter fell 10.2% YoY to | 17767.3 crore. Subsequently, EBITDA at | 2072.4 crore (down 22.5% YoY), was above our estimate of | 1744.7 crore....

GAIL (India) Ltd.s profit beats estimates, margin expands. GAIL (India) consolidated net sales of the company fell 12% to Rs 17882.74 crore in Q3FY20 compared to Q3FY19. OPM of the company fell 170 bps to 12.1% leading to 22% decrease in operating profits to Rs 2171.33 crore.. Other income was up 52% to Rs 195.99 crore. As a result PBDIT decreased 19% to 2367.32 crore. Interest cost fell 7% to Rs 30.57 crore while depreciation rose 39% to Rs 534.85 crore. PBT was down 28% to Rs 1801.9 crore. Effective rate of taxes increased to 43.7% from 34.8%. Profit after tax was down 38% to Rs...

10 February 2020 During 9MFY20, GAILs performance was hampered by poor gas trading, petrochemicals and LPG business; however, the transmission business fared well owing to increase in implied transmission tariffs. The management has guided for incremental volumes of ~2mmscmd from Ramagundam, ~2.5mmscd from Matix, and ~4mmscmd from Kochi- Mangalore pipeline from 1QFY21, and 8-9mmscmd in Jagdishpur-Haldia pipeline in FY22; which reiterates our thesis from our This company guides that with start of all fertilizer plants, no US HH contract would be sold outside India. Trading at ~40% discount to long-term 1-year forward P/E of 14.0x, GAIL offers an excellent investment opportunity. GAIL reported EBITDA miss of 18% at INR20.7b (-22% YoY), led by poor LPG and liquid hydrocarbon performance, while petchem saw some marginal improvement after reporting a huge loss in 1QFY20. PBT was at INR18.7b and the company paid tax at rate of 33.2% during the quarter. GAIL is still in the process of evaluating the new tax rate option.

5 February 2020 the Oil Ministry has moved the cabinet, seeking approval to split GAILs pipeline business into a separate entity. Post approval, a consultant will be appointed to carry out the transfer of assets to a separate entity (taking additional ~8-10 months to complete). GAIL did not start executing the Jagdishpur-Haldia-Bokaro-Dharma (JHBDPL) pipeline until it received approval for Viability Gap Funding (VGF) of ~40% of the estimated INR129.4b project cost. Similarly, Indradhanush Gas Grid Limited (IGGL) has recently got VGF approval of ~60% of the estimated INR92.7b pipeline cost. If GAILs transmission segment is sold off, it remains unclear if a private player is willing to invest in a low IRR pipeline business or if the government is willing to assist them with cardinal VGF. GAILs natural gas (NG) transmission volumes in FY19 stood at 107.4mmscmd (capacity utilization at 52.

Gail India reported Q2FY20 results that were below our estimates on the profitability front. The profitability of gas transmission came in above our estimates on operational basis. The gas trading business was impacted by the fertilisers plant shutdown and fall in LNG spot prices globally. The profitability of petchem and LPG segments was below estimates. Subsequently, EBITDA at | 1562.7 crore (down 46.6% YoY), came in below our estimates of | 2008.8 crore. Reported PAT at | 1064.3 crore (down 45.8%...

As the domestic NG ecosystem (CGD network, RLNG terminals, PLs, revamp of fertiliser plants) develops, India will derive higher benefit from the low LNG prices. New US liquefaction terminals will boost RLNG exports and also keep Henry Hub (HH) prices subdued, enabling GAIL to swap cargoes. Thus, US LNG is not a concern. Our SOTP target is Rs 198 (7.5x Sep-21E EV/e for the stable Gas and LPG transmission busi., 5.0x EV/e for the volatile gas marketing busi., 6.5x EV/e for the cyclical petchem and LPG/LHC busi., Rs 39 for investments and Rs 11 for CWIP). Given GAILs dominant position in Indias gas pipeline network and high share of volume in the upcoming eastern corridor pipeline, its transmission business will drive future earnings. Maintain BUY.

GAIL's Q2FY20 PAT was well below estimates at Rs 10.6bn (42% YoY).