GAIL India - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, GAIL India (GAIL) reported a better-than-expected performance due to higher-than-expected profit from Natural gas trading and LPG segments. We maintain our Neutral rating on the stock.

Top line grew by 25.0% yoy: GAIL's top line grew by 25.0% yoy to Rs.11,089cr above our estimate of Rs.10,705cr, mainly due to strong growth in the natural gas trading segment and LPG segment. Gross revenue of the natural gas trading segment grew by 28.3% yoy to Rs.9,242cr.

EBITDA increases by 20.4% yoy: EBIT of the natural gas trading and LPG segments increased by 58.3% and 91.4% yoy to Rs.496cr and Rs.437cr, respectively. Consequently, GAIL's EBITDA increased by 20.4% yoy to Rs.1,899cr; However, EBITDA margin contracted by 66bp yoy to 17.1% in 1QFY2013.

Lower other income and higher interest costs mutes bottom-line growth: Other income decreased by 41.5% yoy to Rs.38cr and the interest costs increased by 182.7% yoy to Rs.59cr. Consequently, net profit increased by 15.1% yoy to Rs.1,134cr, much ahead of our estimate of Rs.758cr.

Outlook and valuation: Over the past one year, gas production from the KG basin has declined significantly. Further, we do not expect meaningful increase in KG D6 production over the coming two years. Hence, we expect utilization levels for GAIL's pipelines to remain low during FY2013-14. Further, a cap on gas marketing margin (which is currently under review by PNGRB) would remain an overhang on the stock. Hence, we maintain our Neutral rating on the stock.

Source : Equity Bulls

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