KRChoksey's research report on GAILGAIL reported net profit of INR. 6640mn inline with street expectations mainly on account of increase in volumes from natural gas transmission. EBITDA came in at INR. 11560mn which was up on a QoQ and YoY due to lower other operating expenses and lower purchase of finished goods. Subsidy burden of the quarter was NIL. Transmission volumes stood at 97 mmscmd, up 3% YoY and 8% QoQ.We believe the long term prospects of the stock to be positive with new gas supplies however there are no near term triggers. Government has initiated to supply LNG to stranded power plants which will eventually increase transmission volumes and profitability despite decline in tariff’s and margins. Petchem and LPG margin outlook remains weak in near term. We believe that although the transmission volumes have bottomed out and will pick up by mid of FY16 with the ramp up of Dhabol terminal, expansion of the Dahej terminal and ramp up of the volumes of Kochi terminal. Currently GAIL is trading at 15.5x FY17 EPS of INR. 22.3. We recommend BUY on the stock with a price of INR. 409/share.
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