GAIL (BUY): Profitability impacted by weak LPG business - AMBIT

GAIL's 1QFY14 PAT was significantly lower than our expectation. The company made higher-than-expected provisions for subsidies during the quarter. Further, EBITDA contribution from the LPG and OHC segments declined sharply due to lower margins and high inventory losses (as LPG prices declined by ~12% QoQ in 1Q). However, performance of the other core business segments was quite robust; EBITDA contribution from the gas transmission and gas trading segment was 15-20% higher than our expectation due to marginally higher volumes and robust margins. We retain our BUY stance on the stock on valuation grounds, but the under-utilisation of its gas transmission pipeline would continue to be a key overhang on the stock in the near term.

Source : Equity Bulls

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