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Government-owned natural gas explorer and producer, Gail on Monday traded on a bullish note ahead of its bonus issue. The shares were near the day's high. Gail has announced bonus shares in the ratio of 1:2. The stock will turn ex-bonus tomorrow ahead of its record date. Bonus shares are fully paid-up additional shares offered by a listed company to its existing shareholders free of charge as a move to capitalise on its profits or reserves. Gail has recorded a second successive quarter of robust operational growth in the June 2022 period.
At around 2.29 pm, Gail shares were trading at ₹136.70 apiece up by 0.96% on BSE. The shares were near the day's high of ₹137.25 apiece.
The company has a market capitalisation of ₹59,899.16 crore at the current price level.
Gail will offer bonus shares in a 1:2 ratio at a face value of ₹10 each. Simply put, Gail will give one new bonus share to two existing equity shares.
That said, Gail will turn ex-bonus one day before the record date i.e September 6.
Ex-bonus is an important date for investors to be eligible for bonus shares. Generally, to be eligible for bonus shares, an investor should buy the stocks of a company at least one day or two days before the ex-date. This is because of the T+1 and T+2 settlement cycle.
On BSE, the large-cap stock Gail is listed under the 'A' group with the 'T+2' settlement cycle.
Under the 'T+2' settlement option, the shares you bought will get credited to your Demat account after two days.
In Q1FY23, Gail reported a 90.5% yoy jump in its net profit at ₹2,915 crore on the back of bumper earnings from natural gas marketing. Revenue from operations climbed 116% yoy to ₹37,572 crore in Q1FY23 as against ₹17,387 crore for the same quarter last fiscal. Meanwhile, turnover more than doubled to ₹38,033.30 crore in Q1FY23 from ₹17,702.43 crore a year back.
During the quarter, the margin on gas marketing made up for a 12.5% decline in earnings from the gas transportation business and a 74% drop in petrochemicals earnings.
Last week, in its oil & gas report, Harshal Mehta and Amogh Deshpande analysts at ICICI Direct shed some light on media reports stating Gail India and Russian gas company Gazprom are in discussions over the import of natural gas to India from Gazprom Singapore, a subsidiary of Gazprom Germany where the Russian company holds a stake.
Gail’s transmission volume is expected to normalise. They said, "Total contracted LNG portfolio of Gail is at 14 MMTPA. Out of this, Gazprom constitutes 2.5 MMTPA of LNG (~18% of LNG portfolio mix). As per the contract, 36 cargos were to be supplied this calendar year. However, last quarter Gazprom defaulted on the delivery of eight cargos since May-end as per management commentary in Q1FY23 conference call. This led to a supply disruption and impacted 6-7% transmission and trading volume (I-direct estimates) for Gail. Gail had also reduced its internal consumption for petchem segment."
Following the above, ICICI Direct analysts have maintained a 'Buy' rating on Gail with a target price of ₹160 per share.
Post Q1FY23, Probal Sen and Hardik Solanki analysts at ICICI Securities said, "Very high differentials between Asian LNG prices and US Henry Hub benchmarks continue to drive trading gains for GAIL, albeit with the suspension of ~2mt (~7mmscmd) of gas supplies from Gazprom due to the ongoing geopolitical issues, both trading segment gains as well as gas availability for the petchem segment would be constrained over the rest of FY23E."
According to ICICI Securities analysts, the combination of stronger demand, resilient margins, and the additional delta from the new gas pooling scheme (providing access to additional CGD volumes for GAIL’s gas trading segment) mean GAIL should be able to largely offset the sharply higher input costs for petchem and LPG segments over FY23EFY24E.
"We do factor in lower margins for the two segments for FY23E vs our earlier estimates, but this is offset by stronger trading gains (Q1 EBITDA is 50% of our FY23 estimate). Our conviction in GAIL remains intact as mentioned in the foregoing, with valuations at attractive levels. BUY," the analysts said with a target price of ₹225 apiece.
Meanwhile, Anil Sharma and Hemang Khanna analysts at Kotak Institutional Equities said, ". In 1QFY23, GAIL’s core transmission, Petchem, and LPG business saw impact of increased gas cost. Cost pressures will intensify, while LPG/petchem prices are trending lower. We expect both segments to be much weaker in coming quarters. With Gazprom contract in rough weather, and GAIL overall short of LT LNG, marketing outlook is also weak. Downgrade to SELL with revised Fair Value of Rs115."
On the other hand, Sharekhan analysts in its report said, "Global gas supply crisis (Gazprom invokes force majeure to stop LNG supply) creates volume-led earnings headwinds for GAIL’s major businesses until the supply is restored by the gas supplier. The absence of an exact timeline for normalization of gas supply situation makes us cut our earnings and EV/EBITDA multiple for GAIL’s gas transmission, gas marketing and petrochemical business. Thus, we downgrade GAIL to Hold (from Buy) with a revised PT of Rs. 152 as multiple earning headwinds limit upside potential. At CMP, GAIL trades at 5.7x FY23E EV/EBITDA and 5.5x FY24E EV/EBITDA."