Motilal Oswal's research report on GAIL
GAIL reported EBITDA at INR24.3b in 1QFY24, 11% below our est. of INR27.3b due to a weak performance in petchem segment. Petchem segment reported EBIT loss for the fourth consecutive quarter due to a weak pricing environment. The management highlighted that if prices remain at current levels, gas prices need to cool down to USD10-11/mmBtu from USD13/mmBtu in 1QFY24 for petchem segment to breakeven. Transmission segment recorded a benefit of INR6.6b in 1QFY24 due to a tariff hike implemented on 1st Apr’23. The benefit is expected increase going ahead as volumes ramp up further. The management expects gas transmission volumes to reach 123mmscmd by the end of FY24 and ~138- 140mmscmd over the next 2-3 years from 116mmscmd currently. Owing to the underperformance in 1QFY24, we cut our FY24E EBITDA/PAT by 12% while keeping FY25 estimates broadly unchanged.
Outlook
We value the core business at 10x FY25E adjusted EPS of INR12. Adding the value of listed and unlisted investments of INR25, we arrive at a TP of INR145/share. Maintain BUY.
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