MOSL: GAIL INDIA (Neutral)-Pata capacity doubles-Ramp-up of Pata-2 on schedule

​GAIL INDIA: Pata capacity doubles; Ramp-up of Pata-2 on schedule

(GAIL IN, Mkt Cap USD9.4b, CMP INR375, TP INR335, 11% Downside, Neutral

We recently visited GAIL’s petrochemicals plant in Pata, Uttar Pradesh. Key takeaways:

• Utilization of the Pata plant stands at ~70% (~110% for Pata -1), which management expects to ramp up to 90%/100% in FY18/19.
  
• Gas transmission volumes stand at ~108mmscmd in March 2017 v/s 103mmscmd in 3QFY17.
  
• Progress of the Vijaipur-Auraiya-Phulpur pipeline (VAPPL) and the Urja-Ganga project is on track, and management is confident of meeting the completion deadlines.
  

Pata plant utilization to ramp up to 90%/100% in FY18/19

• ​Capacity at the Pata plant has almost doubled to 810ktpa (from 410ktpa) post expansion. Utilization stands at ~70% at Pata-2 and ~110% at Pata-1.
  
• For the Pata plant, management has guided for FY18/19 utilization of 90%/100% with production capacity of 730/810ktpa. It also hinted at a short shutdown period in April 2017.
  
• Total investment for expansion of INR81.4b at Pata-2 and ~INR40b for Pata-1.
  
• Current C2/C3 mix at 80/20, which management expects to improve to 60/40.