Buy GAIL; target of Rs 448: Edelweiss

GAIL delivered strong Q1FY17 results with PAT at INR 8.5bn 12% ahead of estimates, led by significant turnaround in petchem segment. The strong performance was broad based: 1) petchem EBITDA turned black after 5 quarters (136% EBITDA beat) due to sharp reduction in LNG cost and encouraging production ramp-up in the new unit (PATA-II); 2) gas transmission EBITDA was 10% ahead, driven by operating efficiencies, while throughput and tariff were in line; and 3) trading EBITDA was 31% ahead on higher trading margins (24% ahead). We foresee robust earnings momentum as cyclical segments (petchem, LPG) benefit from gradual oil recovery, benign feedstock costs and ramp up of petchem units (PATA-II, BCPL). Maintain ‘BUY’ with TP of INR 448 (INR 442 earlier).For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.