GAIL - Result Review - Angel Broking

GAIL's 1QFY2014 profitability performance was lower than our expectation due to higher than expected subsidy burden. The company's top line grew by 15.9% yoy to Rs.12,856cr (above our estimate of Rs.12,296cr) mainly due to better than expected performance from Petrochemicals and Natural gas trading segment which grew by 92.2% and 19.7% yoy to Rs.1,103cr and Rs.11,058cr respectively. The company's fuel subsidy burden stood at Rs.700cr in 1QFY2014, compared to Rs.700cr in 1QFY2013 and Rs.587cr in 4QFY2013. The petrochemical segment's EBIT grew by 123.8% yoy to Rs.438cr. However, natural gas trading EBIT decreased 39.0% to Rs.303cr and the LPG segment reported a loss of Rs.11cr in 1QFY2014 compared to a profit of Rs.437cr in 1QFY2013. GAIL's EBITDA therefore declined by 22.9% yoy to Rs.1,464cr in 1QFY2014 and EBITDA margin contracted by 574bp yoy to 11.4%. The tax rate also increased to 34.0% in 1QFY2014 compared to 32.7% in 1QFY2013 and therefore the company's net profit decreased by 28.7% yoy to Rs.808cr (below our estimate of Rs.918cr).

We maintain our Neutral view on the stock.

Source : Equity Bulls

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