Proposal of unified pipeline tariff hike by 60% for GAIL is positive for the stock

India Infoline News Service | Mumbai | September 29, 2017 09:04 IST

PNGRB has put up a consultation document on unified pipeline tariff proposing a 60% hike in tariff by GAIL

GAIL India
Proposal of unified pipeline tariff hike by 60% for GAIL is positive for the stock. The upward revision in GAIL’s pipeline tariffs was long overdue. Any incremental hike in pipeline tariffs would directly add to net profit of the company. Our sensitivity analysis estimates 10% change in tariff to lead to 6.5% change in Earnings. Management is also confident of implementation of uniform tariff soon.

We estimate 13% EPS CAGR over FY17-19E on the back of: 1) steady volume growth in the core business; and 2) stabilisation of the petchem units. Any upward revision in pipeline tariffs present upside risks. We have a positive outlook with SOTP-based TP of Rs 440. The stock is available cheap at 15x FY19E EPS.


***Note: This is a NSE Chart

 

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