Buy GAIL India; target of Rs 440: Angel Broking

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Buy GAIL India; target of Rs 440: Angel Broking

Angel Broking is bullish on GAIL India and has recommended buy rating on the stock with a target price of Rs 440 in its January 31, 2012 research report.

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Angel Broking is bullish on GAIL India and has recommended buy rating on the stock with a target price of Rs 440, in its January 31, 2012 research report.

"For 3QFY2012, GAIL India (GAIL) reported a higher-than-expected performance. The company's net sales, EBITDA and PAT increased by 34.6%, 34.6% and 12.8% yoy, respectively. During 3QFY2012, GAIL's top line grew by 34.6% yoy to Rs 11,260cr, above our estimate of Rs 9,587cr, mainly due to strong growth in the natural gas trading, petrochemical and LPG segments. Gross revenue of the natural gas trading, petrochemical and LPG segments grew by 35.1%, 53.7% and 32.6% yoy to Rs 9,150cr, Rs 878cr and Rs 965cr, respectively. EBIT of the natural gas trading, petrochemical and LPG segments grew by 56.9%, 98.3% and 103.6% yoy to Rs 323cr, Rs 387cr and Rs 305cr, respectively. However, EBIT of the natural gas transmission and LPG transmission segments decreased by 6.7% and 8.2% yoy to Rs 621cr and Rs 78cr, respectively. Consequently, GAIL's EBITDA increased by 34.6% yoy to Rs 1,795cr in 3QFY2012. Tax rate increased to 31.7% in 3QFY2012, compared to 28.1% in 3QFY2011. Consequently, net profit grew by 12.8% yoy to Rs 1,091cr, above our estimate of Rs 1,018cr."

"The substantial capex slated ahead for transmission pipelines could see maximum capitalization on incremental gas production domestically. Also, any major oil/gas discovery could be a key catalyst for the stock. Over the last five years, GAIL has traded at an average one-year forward PE of 16.0x, while currently it is trading at PE of 12.0x FY2012E and 10.5x FY2013E. On P/B basis, the stock trades at 2.1x FY2012E and 1.8x FY2013E, compared to its five-year average P/BV of 2.7x. Further, considering the anticipated volume growth in the next two-three years, we maintain our Buy rating on the stock with an SOTP target price of Rs 440," says Angel Broking research report.

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To read the full report click on the attachment