GAIL India set for strong Q1 profits boosted by gas demand, petchem gains

LPG EBITDA may decline slightly due to lower prices, while Petchem EBITDA should increase due to reduced feedstock costs and higher polyethylene prices, analysts said

GAIL India Ltd is expected to report strong June quarter profits compared to last year, driven by higher gas demand and improved petchem operations. LPG EBITDA may decline slightly due to lower prices, while petchem EBITDA should increase due to reduced feedstock costs and higher polyethylene prices, analysts said. The firm will report Q1 earnings on July 30.

According to estimates from 7 brokerages surveyed by Moneycontrol, Q1 EBITDA is expected to reach Rs 3,764 crore, up 55% year-on-year. Revenue is projected to be Rs 33,565 crore, up 3.9% quarter-on-quarter and 4.2% year-on-year. Net profit is likely to be Rs 2,226 crore, up 57% year-on-year and 2.2% quarter-on-quarter.

Brokerages expect Q1 natural gas transmission volumes to be 130 mmscmd, up 12% year-on-year driven by strong consumption in the power sector. Natural gas trading volumes are anticipated to be 102 mmscmd, flat year-on-year. Petchem volumes are likely to increase by 48% year-on-year to 240 kilo tonnes, while LPG volumes are expected to rise 5% year-on-year to 260 kilo tonnes. Sequentially, all volumes are expected to remain flat.

What factors are driving the earnings?

Transmission Segment: EBITDA is expected to surge year-on-year due to increased transmission volumes and tariffs. Analysts predict a 12% year-on-year and 5% quarter-on-quarter increase in transmission volumes. Additionally, higher margins in the gas trading segment are expected to continue as GAIL has shifted all its cargoes to the Indian market.

Petchem segment: EBITDA will also rise due to the petchem segment, which is benefiting from higher utilisation and lower LNG prices. This segment is expected to turn profitable with increased capacity utilisation (90 percent) and softer spot LNG prices.

What to look out for in the quarterly show?

Analysts will monitor capex guidance, natural gas transmission volumes, and the petchem segment. They will also look for updates on the JBF petrochemicals plant, the near-completion PDH-PP project at Usar, and the PP project at PATA. Additionally, they will seek comments on GAIL's exploration of Isopropyl Alcohol production at Usar.