GAIL - Q3FY13 Result Update - LKP Research

Lower subsidy drives Q3FY13 performance

GAIL's Q3FY13 net profit of Rs12.8bn was significantly higher than our estimate o fRs10.3bn primarily on account of lower subsidy burden during the quarter. GAIL's subsidy burden for the quarter fell by 19.7% yoy to Rs70bn (qoq -10.9%) which was significantly lower than our estimate of Rs9.1bn. Net revenues at Rs124.7bn registered a jump of 10.8% yoy mainly on account of higher revenues in natural gas trading, LPG & OLHC and petchem segments. GAIL's gas transmission volumes during the quarter declined to 105mmscmd (lowest in last 14 quarters) due to fall in volumes from RIL's KG D6 while gas transmission tariff declined by 11.8% yoy to Rs969/tcm (qoq +3.7%). Petchem volumes increased sequentially by 26.7% while realizations improved by 4.8% qoq. However, petchem margins during the quarter declined by sequentially 783bps to 39.7% (yoy -443bps) on account of higher raw material costs. Gas trading segment reported a strong 22% sequential jump in EBIT to Rs2.9bn as the company was able to earn higher marketing on higher LNG volumes.

We lower our gas transmission assumption for FY13e and FY14e to 106 and 111 mmscmd. Consequently, we lower our FY13e/FY14e earnings by 4.6/4.4% and. We maintain BUY rating on GAIL with a revised SOTP based price target of Rs407. At the CMP, the stock is trading at 8.5x and 6.2x FY14e earnings and EV/EBITDA respectively.

Source : Equity Bulls

Keywords