Accumulate GAIL; target of Rs 372: Dolat Capital

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Dolat Capital's research report on GAIL

GAIL Q3FY19 revenue was marginally above estimates. Profitability was better due to higher than expected performance in natural gas marketing segment. Considering the decline in crude oil, performance in gas marketing segment is commendable and made us believe that Q4FY19 performance should also be like last quarter. This has been the biggest hangover on the stock price and will continue to be. Management continues to guide that all cargoes expected in near future are completely hedged. Gas transmission volumes at 107 MMSCMD were marginally below estimates and not expected to improve significantly in the FY20. Petrochemicals business margins are impacted by higher input cost, however, moving towards higher revenue products with better margin will improve the outlook of this segment. Tariff hike for the transmission segment has been the most awaited trigger and is expected now only in second half of FY20.

Outlook

We believe that most of the negatives are priced in the stock. Risk to our call remains significant decline in profitability in gas marketing segment. Maintain Accumulate with a target price of ` 372.

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