Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Oil & Gas - Oil, gas & spot LNG surge to bring gains for GAIL & OIL - ICICI Securities

Posted On: 2021-06-19 11:20:41 (Time Zone: UTC)


JKM spot LNG prices, which fell from record highs in Jan'21 to US$5.6/mmbtu in Mar'21, have rebounded to US$12.1/mmbtu. Low gas inventories in North Asia and Europe (at 3-year low) due to cold winters and outages at LNG export plants, have meant the two regions are competing with each other for supply thereby, leading to surge in both European gas and Asian spot LNG prices. GAIL is set to gain from oil and spot LNG surge, which augurs well for its FY22-FY23E gas marketing EBITDA outlook. Higher underlying prices mean higher deepwater, APM gas price and upside of 1-10% to OIL's FY22-FY23E EPS and 2% to RIL's FY23E EPS. We estimate Gujarat Gas' (GGL) margins to rebound QoQ in Q1FY22E but may correct in Q2. Reiterate BUY on GAIL and OIL and HOLD on GGL and RIL.

- JKM spot LNG up 116% from Mar'21 low: Severe winter in North Asia led to depletion of gas inventories and surge in Japan Korea Marker (JKM) spot LNG to US$32/mmbtu in Jan'21. European gas storage is at a 3-year low for this time of the year due to diversion of large LNG volumes to Asia in Q1CY21 (high JKM prices), high gas withdrawals due to very cold winter and record high demand in Apr'21 (unseasonably low temperatures) and relatively low pipeline supply from Russia and Norway. Competing with each other for supply to replenish depleted inventories has led to a surge in JKM spot LNG by 116% to US$12.1/mmbtu from US$5.6/mmbtu in early-Mar'21 and TTF European gas price to ~US$10/mmbtu. TTF price rise is also due to surge in EU carbon price, which improved coal to gas switching economics.

- GAIL's FY22-FY23E gas marketing EBITDA outlook good due to surge in oil & spot LNG: Based on YTD prices and futures, Brent is at US$69.1-67.4/bbl in FY22- FY23E vs US$43.5/bbl in FY21 and spot LNG at US$11.3-8.5/mmbtu vs US$5.4/mmbtu in FY21. We estimate GAIL's trading profit on selling Henry Hub (HH) linked US LNG at Brent linked prices and spot prices at US$1.5-3.7/mmbtu in FY22E and US$1.6-1.2/mmbtu in FY23E vs loss of US$0.6-1.1/mmbtu in FY21. At futures, as of 14-Jun'21, GAIL's gas marketing EBITDA works out to Rs39.8-44.0bn (assuming all volumes sold at oil-linked prices) in FY22-FY23E vs loss of Rs3.2bn in FY21. GAIL has indicated that 1) 80% of its FY22E LNG is tied up (some when oil prices were lower) while 20% is deliberately not tied up to gain from strength in spot LNG and 2) 50% of its FY23E LNG is tied up, 30% tied up but positions kept open and 20% not tied. We are estimating marketing EBITDA at Rs27.6-39.2bn in FY22-FY23E. Upside to FY22E EBITDA may be Rs8.9-12.4bn as 20-28% of US LNG may be sold at spot price, though some downside is likely on volumes tied up at lower oil prices. Upside to GAIL's FY22E EPS may be 2-17% and fair value 1-5% from upside in gas marketing, petrochemical and LPG EBITDA.

- GGL's margins to rebound in Q1Y22E but may correct in Q2: We estimate GGL's Q1FY22E EBITDA margin rising to Rs7.5/scm from Rs5.1/scm in Q4FY21 but its Q2 margin may correct based on prevailing oil and spot LNG futures.

- Higher APM & deepwater gas price may boost OIL and RIL's EPS by 1-10% & 2%: We estimate APM gas price at US$3.15-4.7/mmbtu and RIL's deepwater gas price at US$6.8-7.5/mmbtu in H2FY22E and FY23E vs US$2-4/mmbtu in H1FY22.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.


Other Headlines:

Q1FY22 Result Update - Syngene International - ICICI Direct

Sterlite Technologies - Q1FY22 First Cut - ICICI Direct

Bajaj Auto - Q1FY22 First Cut - ICICI Direct

UltraTech Cement - Q1FY22 First Cut - ICICI Direct

HUL - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - Bajaj Finserv - ICICI Direct

Hindustan Zinc - Q1FY22 First Cut - ICICI Direct

Q1FY22 Analyst Meet - Company Update - Avenue Supermarts - ICICI Direct

Q1FY22 Result Update - Indian Bank - ICICI Direct

FY2020-21 AGM Update - Trent Ltd - ICICI Direct

Q1FY22 Result Update - Supreme Industries - ICICI Direct

Indian Energy Exchange - Q1FY22 First Cut - ICICI Direct

CSB Bank - Q1FY22 First Cut - ICICI Direct

Hindustan Unilever - Q1FY22RU - First cut - YES SECURITIES

Asian Paints Report - Demand rebound strong; profitability, not so much! - HDFC Securities

Maintain ADD on Supreme Industries - Demand recovery to make up for Q1 loss - HDFC Securities

Maintain REDUCE on Jubilant FoodWorks - No fireworks to sustain expensive valuation - HDFC Securities

Mahindra CIE Automotive - Continues to walk the talk - ICICI Securities

Jubilant Foodworks - Capitalizing on the opportunity (per our expectations) - accelerated store expansion - ICICI Securities

Equitas Small Finance Bank - Focus on building stable, scalable bank with prudent and conservative approach - ICICI Securities

CEAT - Challenging quarter amidst rising input costs - ICICI Securities

Havells India - Likely market shares gains across segments - ICICI Securities

I-direct Instinct - PPAP Automotive - ICICI Direct

Consumer Durables Sector Update Report - Inspiring recovery; rich valuation to sustain - HDFC Securities

CEAT - Q1 FY22 first cut - YES Securities

Havells India - Q1 FY22 first cut - YES Securities

Polycab India - Q1 FY22 first cut - YES Securities

Jubilant Foodworks - Q1 FY22 results and investor call takeaways - YES Securities

Asian Paints - Q1 FY22 results and investor call takeaways - YES Securities

Bajaj Finance - Q1 FY22 Result Report - YES Securities

CRISIL Ltd - Q2 CY21 Result Report - YES Securities

HCL Technologies - Q1 FY22 Result Report - YES Securities

Gland Pharma - Q1 FY22 Result Report - YES Securities

ICICI Prudential Life - Q1 FY22 Result Report - YES Securities

Syngene International - Q1 FY22 Result Report - YES Securities

Q1FY22 Company Update - GTPL Hathway - ICICI Direct

Supreme Industries - Q1FY22 First Cut - ICICI Direct

Bajaj Finserv - Q1FY22 First Cut - ICICI Direct

Polycab India - Q1FY22 First Cut - ICICI Direct

Rallis India - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - Asian Paints - ICICI Direct

Gladiator Stocks - Kansai Nerolac Paints - ICICI Direct

Q1FY22 Result Update - Nippon Life India AMC - ICICI Direct

Q1FY22 Result Update - Bajaj Finance - ICICI Direct

Q1FY22 Company Update - Mastek Ltd - ICICI Direct

ICICI Prudential Life - Strong performance in tough times - HDFC Securities

Maintain REDUCE on Bajaj Finance - Speed bumps to a fast recovery - HDFC Securities

Maintain BUY on Mastek - Strong growth engine - HDFC Securities

First cut and detailed views on Asian Paints Q1FY22 Results - YES SECURITIES

Larsen & Toubro Infotech - Margin trajectory will be the key - ICICI Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020