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Feb 21, 2013, 01.22 PM IST | Source: Moneycontrol.com

Hold GAIL India, says Ventura Securities

Ventura Securities has recommended hold rating on GAIL India, in its February 20, 2013 research report. According to the research firm, the company is likely to be impacted negatively in FY14/FY15 by higher depreciation and interest expenses, which will offset earnings growth from increased petchem capacities and gas transmission volumes.

Ventura Securities has recommended hold rating on GAIL India , in its February 20, 2013 research report. According to the research firm, the company  is likely to be impacted negatively in FY14/FY15 by higher depreciation and interest expenses, which will offset earnings growth from increased petchem capacities and gas transmission volumes.

"GAIL's net profit for the third quarter increased by 18% to Rs.1,285 crore against Rs.1,091 crore in the corresponding period previous year. The Gross Margin increased by 19% to Rs.2,156 crore in the third quarter of the current financial year against Rs. 1,816 crore in the corresponding period last year. The PBT increased by 16% to Rs.1,859 crore in the third quarter of the current financial year against Rs.1,598 crore in the corresponding period last year. PAT was up by 18%, while on a nine month basis it was up by 7%.

GAIL's Gas trading business registered a robust performance with revenues increasing by 10.6% to Rs 10118.0crore on account of increase in pricing. The volume for the quarter was down by 3.7% yoy to 81.8 mmscmd. Lower gas volumes for domestic sources and limitation on re gas capacity led to the lower volumes. The gas trading margins declined to 3.0% from 3.5% reported in the previous corresponding quarters.

Natural Gas transmission volumes declined by 12.2% yoy to 104.59 mmscmd as against 119.06 mmscmd in the corresponding quarter last year. However, the revenues stood flat at Rs 990 crore v/s Rs 1087 crore reported in Q3FY12. EBIT of the segment declined by 0.2% yoy to Rs 620 crore v/s Rs 621 crore in Q3FY12.

LPG transmission business registered negative revenue of Rs 81 crore as against Rs 122 crore in the corresponding period last year. Consequently, the EBIT of the segment declined at Rs 13.3 crore v/s Rs 77.5 crore reported in Q3FY12, impacting overall profitability.

GAIL India is likely to be impacted negatively in FY14/FY15 by higher depreciation and interest expenses, which will offset earnings growth from increased petchem capacities and gas transmission volumes. Consequently, we expect transmission and trading volumes to remain flat for the next one year. With no major near term triggers, we expect GAIL to move sideways in the near term. At the CMP of Rs 338, the stock is currently trading at 9.0x and 7.9x of its FY14E and FY15E earnings estimates and we maintain HOLD on the stock," says Ventura Securities research report.

FIIs holding more than 30% in Indian cos

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