Hold GAIL India; target Rs 349: ICICIdirect.com
Brokerage house ICICIdirect.com has recommended hold rating on GAIL India with a target price of Rs 349, in its July 26, 2013 research report.
August 02, 2013 / 11:41 IST
ICICIdirect.com's report on GAIL India
"GAIL India has declared its Q1FY14 results with revenues at Rs 12899.9 crore and PAT at Rs 808.2 crore. The topline grew 16.1 percent YoY, in line with our estimates. The topline growth was driven by 9.2 percent, 19.7 percent and 92.2 percent growth in the transmission, trading & petrochemical business, respectively. The bottomline was below our estimates mainly on account of higher than estimated subsidy burden of Rs 700 crore (our estimate: Rs 479.7 crore), which resulted in EBIT level loss in the LPG and liquid hydrocarbons business. Another reason for lower profitability was lower EBIT margin in the petrochemical business due to higher feedstock cost. Over the next few years, the company’s focus will be on the gas trading business and expansion of the petrochemical business. We have a HOLD rating on the stock with a target price of Rs 349.""Revenues from the petchem business almost doubled due to 83.3 percent YoY increase in volumes. The 2.5 percent custom duty hike and currency depreciation will augur well for the petchem business. The expansion of the petchem business will increase its share in the company’s EBIT from 24.1 percent in FY13 to 34.8 percent in FY15E. The LPG business had an EBIT level loss due to higher subsidy burden and higher feedstock cost. Margins are expected to reduce when the APM gas price hike is implemented. However, if the hike happens, there is a strong case for GAIL being excluded from the subsidy sharing mechanism. We have a HOLD recommendation on the stock, with a target price of Rs 349," says ICICIdirect.com research report.Disclaimer: 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. 
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