Sharekhan's research report on GAIL (India)
Q3FY2021 operating profit of Rs. 1,920 crore (up 43.4% q-o-q) missed our estimate by 12% due to EBITDA loss of Rs. 45 crore for the gas marketing business, which offset robust petchem EBITDA (up 5.2x y-o-y to Rs. 549 crore). Volumes across segments are back to pre-COVID-19 levels with gas transmission/marketing volume at 110 mmscmd/96 mmscmd and petchem utilisation at 106%. Earnings to improve over FY2022-FY2023, as higher gas demand from fertilser plants in India would address concerns of marketing of US LNG contracts, sustained high petchem profitability, and 5%-6% annual growth in gas transmission volumes.
Outlook
Valuation of 6.1x its FY2023E EV/EBITDA seems attractive given potential value unlocking from monetisation of gas pipeline assets and dividend yield of ~5%. Hence, we maintain our Buy rating on GAIL with a revised PT of Rs. 155.
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