GAIL reported Ebitda miss of 18% at Rs 20.7b (-22% y-o-y), led by poor LPG and liquid hydrocarbon performance, while petchem saw some marginal improvement after reporting a huge loss in 1QFY20.
During 9MFY20, GAIL’s performance was hampered by poor gas trading, petrochemicals and LPG business. However, the transmission business fared well owing to increase in implied transmission tariffs. The management has guided for incremental volumes of ~2mmscmd from Ramagundam, ~2.5mmscd from Matix, and ~4mmscmd from Kochi-Mangalore pipeline from 1QFY21, and 8-9mmscmd in Jagdishpur-Haldia pipeline in FY22, which reiterates our thesis from our earlier note. This company guides that with the start of all fertiliser plants, no US HH contract would be sold outside India. Trading at ~40% discount to long-term 1-year forward P/E of 14.0x, GAIL offers an excellent investment opportunity.
GAIL reported Ebitda miss of 18% at Rs 20.7b (-22% y-o-y), led by poor LPG and liquid hydrocarbon performance, while petchem saw some marginal improvement after reporting a huge loss in 1QFY20. Depreciation was higher by 35% y-o-y, which was offset by higher other income (+42% y-o-y). PBT was at Rs 18.7b and the company paid tax at rate of 33.2% during the quarter. GAIL is still in the process of evaluating the new tax rate option. PAT came in 20% below estimate at Rs 12.5b (-26% y-o-y). The company took tax write-back of Rs 173m, adjusting for which, PAT stood at Rs 12.7b. For 9MFY20, reported Ebitda and adjusted PAT was lower by ~25% y-o-y at Rs 58.9b/Rs 35.8b. Higher depreciation was offset by higher other income.
Capex for 9MFY20 stood at Rs 40b (3QFY20 was at Rs 16b), with full-year capex guidance at Rs 60-65b. So far, a total capex of Rs 88b (out of Rs 132b) has been done for Jagdishpur-Haldia-Bokaro-Dhamra pipeline and a grant of ~Rs 32b has been received from the government. We value GAIL at 8x FY21E EPS (adjusted for other income) and then add the value of investments. With a target price of Rs 150, we reiterate ‘buy’.