1. GAIL shares slip despite 244% rise in Q1 net profit; should you buy?

GAIL shares slip despite 244% rise in Q1 net profit; should you buy?

GAIL (India) shares were trading lower in the afternoon trade on Thursday despite the company reported 244.04 per cent rise in net profit at Rs 1335.18 crore for the quarter ended June 30, 2016

By: | New Delhi | Updated: September 8, 2016 4:24 PM
BSE Sensex NSE Nifty gail shares GAIL (India) shares were trading lower in the afternoon trade on Thursday despite the company reported 244.04 per cent rise in net profit at Rs 1335.18 crore for the quarter ended June 30, 2016 (Reuters)

GAIL (India) shares were trading lower in the afternoon trade on Thursday despite the company reported 244.04 per cent rise in net profit at Rs 1335.18 crore for the quarter ended June 30, 2016 against Rs 388.09 crore in the same quarter last year. Net sales of the company dipped by 14.64 per cent year-on-year to Rs 10,686.58 crore for the quarter under review against Rs 12519.04 crore in the same quarter last fiscal. At 12.32 pm, shares of GAIL were trading 1.48 per cent down at Rs 390.65. The scrip opened the day at Rs 406.90 and has touched a high and low of Rs 407 and Rs 387.80, respectively, in trade so far. Sensex was trading 28.49 points up at 28,954.85.

Operating profit of the company jumped by 95.20 per cent year-on-year to Rs 2198.68 crore for the quarter ended June 30, 2016 against Rs 1126.40 crore in the same quarter last year. Total expenditure of the company dipped by 20.81 per cent year-on-year to Rs 9113.43 crore.

Brokerage firm Motilal Oswal in a research report said, “GAIL’s reported 1QFY17 EBITDA was above our estimate led by higher gas trading gains and one-time tariff revision gain of Rs 80 crore. Reported net profit was boosted due to one-time gain of Rs 490 crore from the stake sell of MGL through IPO.” Motilal Oswal has neutral rating on GAIL India shares.

Ambit Capital believes GAIL is set to benefit from improvement in petrochemical business volumes and gas transmission business profitability due to recent tariff hikes. However, the brokerage firm flags concern that Gail’s long-term LNG contracts remain uncompetitive in the current price environment. It maintained ‘Sell’ rating on GAIL shares with a 12-month target price of Rs 365.

Later, the scrip closed 1.92 per cent down at Rs 388.90.

(With agency inputs)

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