Sharekhan's research report on GAIL (India)
Standalone PAT of Rs. 1,412 crore (up 134% q-o-q) was 31% below our estimate due to continued losses in the petchem segment, miss in LPG-LHC earnings, lower other income and higher interest costs. Gas transmission EBITDA grew strongly by 4.6x q-o-q to Rs. 1,351 crore, reflecting a 7.5% q-o-q rise in gas transmission volume and benefit of tariff revision. Gas marketing EBITDA at Rs. 1,103 crore (up 1.9x q-o-q) was supported by better margins. The petchem segment was hit by lower HDPE prices; LPG-LHC segment witnessed recovery but missed estimate. Potential higher tariff and strong volume guidance (123 mmscmd/138-140 mmscmd by end-FY24/FY26) would drive sustained healthy growth for gas transmission business while gas marketing EBITDA guidance of Rs. 3,500 crore is encouraging. Petchem may take time for complete turnaround given subdued petchem prices.
Outlook
We maintain a Buy on GAIL with a revised SoTP-based PT of Rs. 135 (reflects higher value for gas transmission). Valuation of 6.5x FY25E EV/EBITDA is at steep discount to historical average of 8.4x and stock offers a healthy dividend yield of 4-5%.
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