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GAIL shares crash 8.5%; Credit Suisse retains underperform

Falling oil prices hurt both the petrochemical and LPG segment of GAIL. The profit & loss impact of petchem expansion should also keep earnings depressed, Credit Suisse said.

August 24, 2015 / 03:15 PM IST
 
 
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Moneycontrol Bureau


Shares of GAIL India slipped more than 9 percent intraday to hit a fresh 52-week low of Rs 283.35 on Monday after Credit Suisse has maintained underperform rating on the stock with revised target price of Rs 265, citing weak crude oil prices.


GAIL is the largest state-owned natural gas processing and distribution company in India.


India's LNG imports increased sharply in July 2015 and are at all-time highs. The brokerage believes Petronet LNG and Shell's Gujarat terminals are operating at full utilisation.


According to its report, there are three drivers for this - Power System Development Fund (PSDF) subsidy to power plants has led to one-third of this increase, fertiliser demand has been robust helped by policy changes, and a 7 percent M-o-M fall in ONGC gas production (on maintenance) necessitated higher imports; this one-off accounts for one-third of the higher imports.

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Helped by higher utilisations, Petronet Q2FY16 EBITDA can be up 15 percent Q-o-Q. However, 2H16 may be weaker, as Petronet LNG will lose volumes to GAIL's Dabhol terminal (restarting October 2015). Stronger trading/ transmission segments add around 10 percent to GAIL EBITDA run-rates, Credit Suisse said.


However, falling oil prices hurt both the petrochemical and LPG segment of GAIL. The profit & loss impact of petchem expansion should also keep earnings depressed, the brokerage said.


Credit Suisse said GAIL's take-or-pay liability can be USD 0.9 billion by December 2015.

At 14:49 hours IST, the scrip of GAIL India was quoting at Rs 285.05, down Rs 26.70, or 8.56 percent on the BSE.

first published: Aug 24, 2015 03:15 pm

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