ICICI Direct recommended hold rating on Gail (India) with a target price of Rs 160 in its research report dated July 09, 2019.
ICICI Direct's research report on Gail (India)
LPG prices have seen a declining trend over the last couple of months. This will have an impact on Gail’s LPG/liquid hydrocarbon (LLH) business. We lower LPG/LLH realisations from Rs 35,000 in Q1FY20E to Rs 32,100 per tonne from Q2FY20E to factor in the recent decline in LPG prices in global markets. Subsequently, we expect LPG/LLH segment EBIT at Rs 1860.2 crore and Rs 1788.2 crore for FY20E and FY21E, respectively. This is expected to result in a reduction in standalone earnings estimate for Gail by ~5% to Rs 11.7 per share & Rs 12.2 per share in FY20E & FY21E, respectively.
We value the company using the SOTP methodology. We value the core business using DCF and assign a target multiple to the EBITDA of other business segments with a HOLD recommendation and a target price of Rs 160.
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