Buy GAIL India; target Rs 454: R K Global

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Buy GAIL India; target Rs 454: R K Global

R K Global is bullish on GAIL India and has recommended buy rating on the stock with a target price of Rs 454, in its January 27, 2012 research report.

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R K Global is bullish on GAIL India and has recommended buy rating on the stock with a target price of Rs 454, in its January 27, 2012 research report.

"GAIL India reported revenue of Rs 112597.8mn in Q3FY12 as compared to Rs 63649.9mn in Q3FY11, registering a growth of 34.6% Y-o-Y (increased 16.1% on sequential basis). The revenue growth is attributed by Petchem and NG Trading sales which grew 53.7% and 35.1% Y-o-Y respectively. LPG & OHCs sales and NG Transmission grew 32.6% and 8.6% Y-o-Y respectively while LPG transmission revenue declined 5.9% Y-o-Y."

"GAIL's Petchem sales volume grew 39.5% Y-o-Y to 113KMT in Q3FY12 as against 81KMT during Q3FY11. Higher petchem volume was supported by 14.7% Y-o-Y growth in Petchem production of 117KMT. Gas trading volume remained strong at 85mmscmd in Q3FY12 as compared to 83mmscmd during Q3FY11. Transmission volumes saw a decline of 2.6% and 0.8% Y-o-Y for LPG and NG respectively. However, sales from LPG & Other LHC were higher by 9.1% Y-o-Y to 361KMT during Q3FY12."

"GAIL reported 34.6% Y-o-Y growth in its Core EBITDA to Rs 17948.8mn during Q3FY12. However, company's Net Profit grew close to 13% Y-o-Y to Rs 10914.2mn on account of lower other income and higher interest, depreciation and tax expenses. GAIL's Other Income declined 88.8% Y-o-Y to Rs 213.5mn in Q3FY12 as against Rs 1905.9mn during corresponding period last year. While its Interest cost, depreciation and tax expenses increased 26.0%, 23.0% and 33.6% Y-o-Y respectively. Further, company provided Rs 4550.7mn subsidy discounts to OMCs during Q3FY12 as against Rs 9049.5mn in Q3FY11."

"At CMP, the stock is trading at a P/E of 9.3x its FY13E EPS of Rs 39 and PBV of 1.9x its FY13E BVPS of Rs 198. We updated our model incorporating Q3 earnings for GAIL to arrive at our SOTP value of Rs 454 (earlier target Rs 514), which offers an upside of 24% from current level. We iterate our buy rating on stock with accumulation at every dip," says R K Global research report.

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