MOSL: GAIL India (Upgrade to Buy)-Concerns over petchem worsens- Gas trading one-off relief
GAIL India: Concerns over petchem worsens; Gas trading one-off relief
(GAIL IN, Mkt Cap USD7.9b, CMP INR124, TP INR154, 24% Upside, Upgrade to Buy)
1QFY20 EBITDA was flat YoY at INR22.6b (in-line), led by better marketing segment performance, while petchem continued its poor performance. Depreciation was higher by 7% YoY, which was offset by lower interest cost (-46% YoY) and higher other income (+26% YoY). PAT stood in line with est. at INR12.9b (+2% YoY, -11% QoQ).
Gas transmission EBIT stood at INR8.6b (+22% YoY). Volumes were 2% lower YoY at 105mmscmd (v/s our est. at 108mmscmd), due to lower demand owing to the shutdown at several fertilizer plants.
- Kochi-Mangalore pipeline is expected to be completed by Oct’19. Other pipelines in East India are expected to get completed by FY22.
Gas trading EBIT stood at INR8.5b (+54% YoY), owing to higher realizations.
- Company sold 97mmscmd of volumes during the quarter; comprising ~84.5mmscmd in the domestic market and ~12.5mmscmd internationally.
- Company has hedged sufficient US cargoes for FY20/FY21, though it remains to be seen how these US contracts work in an environment of increasing LNG supply glut.
Gail India is engaged in the natural gas, liquified natural gas ("LPG"), liquid hydrocarbons and petrochemicals exploration and production and city gas distribution through its natural gas trunk pipelines covering a length of around 7000 km and over 1900 km of LPG pipeline transmission network. Co. is also engaged in the telecom business with the network of approx. 13,000 km throughout India. Co. operates six primary business segments: Transmission Services, Natural Gas Trading, Petrochemicals, LPG and other Liquid Hydrocarbons, GAILTEL and City Gas Distribution.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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