Emkay Global Financial is bullish on GAIL (India) has recommended buy rating on the stock with a target price of Rs 135 in its research report dated June 25, 2020.
Emkay Global Financial's report on GAIL (India)
GAIL reported Q4FY20 standalone EBITDA/PAT of Rs24.8/30.2bn. PAT was higher due to the adoption of the new lower tax rate and Rs1bn exceptional income. EBITDA beat estimates by 19% due to better income in petchem, gas marketing and other segments. Reported gas transmission EBITDA fell 5% qoq to Rs11.6bn and volumes were down 1% at 109.0mmscmd. Marketing EBITDA grew 20% qoq to Rs6.3bn, driven by volume growth of 2% qoq to 97.8mmscmd and higher blended RLNG margin of USD0.35/mmbtu. Petchem EBITDA came in at Rs1.85bn (Rs170mn est.), due to a sharp drop in opex. Pata utilization was 103% but sales fell 18% qoq. LPG-LHC EBITDA of Rs5.5bn missed on 10% volume drop and lower realization to Arab Gulf. Other segment EBITDA jumped 21% yoy.
We cut FY21E EPS by 9% due to Covid-19 but raise FY22E EPS/TP by 2%/8% due to lower tax and valuing unlisted investments. Maintain Buy with Rs135 TP, but turn EW in EAP from UW. Q1 is expected to be weak but tariff reforms could be a material trigger.
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