June 13, 2016 / 18:31 IST
Religare's research report on GAIL India
GAIL expects petrochem production volumes to improve to ~120kmt in Q1FY17, reaching ~600kmt in FY17 and ~800kmt in FY18, implying higher-than-expected production guidance. Management has been striving to reduce operating costs across businesses, petrochemicals being the major focus. GAIL has appointed consultants that will earn fees based on the quantum of reduction in costs – the first such initiative in the company’s history. The impact of these measures would be visible by end-FY17.
We expect GAIL’s petrochemical business earnings to continue trending upwards over the coming quarters, on higher volumes and PE prices. We maintain our SOTP-based Mar’17 TP at Rs 490 and reiterate BUY. A surge in India’s LNG consumption augurs well for GAIL’s gas transmission and trading businesses.
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