ICICI Direct is bullish on Gail (India) has recommended buy rating on the stock with a target price of Rs 390 in its research report dated February 06, 2019.
ICICI Direct's research report on Gail (India)
Gail India reported a good set of Q3FY19 numbers, which came in above our estimates. The profitability of gas transmission, gas trading and LPG segment were above our estimates whereas petchem segment results were below our estimates • EBITDA at Rs 2673.5 crore (up 35.7% YoY) came in above our estimates of Rs 2227.6 crore on account of better gas transmission profits (up 31%), higher margins in natural gas trading (up 2x YoY) and higher realisations in LPG/LLH segment (up 26.7%)• Subsequently, reported PAT at Rs 1681.2 crore (up 33.2% YoY) came in above our estimates of Rs 1377.1 crore.
Petroleum and Natural Gas Regulatory Board’s (PNGRB) implementation of Gail’s proposal for unified tariff plan will provide significant movement in Gail’s performance over the long term. In the medium term, tariff revision for HVJ, DVPL pipelines will be positive for earnings. On the operational front, stable gas volumes, further pipeline expansion and growing CGD sector would serve as a key trigger for the stock. However, lower oil prices will impact performance in LPG/LLH and petchem business segments. We value the company using the SOTP methodology, valuing the core business using DCF and assigning a target multiple to the EBITDA of other business segments with BUY recommendation and target price of Rs 390.
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