- Net sales rise 17.1% yoy driven by higher revenues from the Natural gas trading segment (+28% yoy)
- Gas transmission volumes fall 10.9% yoy and 3.5% qoq in line with falling natural gas production at the KG-D6 field. Gas trading segment also reported a fall of 3.6% yoy and 2.6% qoq on back of lower gas offtake by some power plants.
- OPM at 12.4% saw a decline of 483bps yoy and 491bps qoq.
- Amongst segmental EBIT margins, petchem segment saw sharp improvements (benefiting from improved product prices during the quarter) while other segments witnessed declines
- Subsidy burden at Rs7.85bn was higher 38.7% yoy. In the LPG transmission segment, Rs1.23bn revenue has been de-recognized in view of the revision of LPG pipeline tariff (Jamnagar-Loni pipeline).
- Maintain Market Performer with a 9-month target price of Rs366
|(Rs m)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|OPM (%)||12.4||17.2||(483) bps||17.3||(491) bps|
|Effective tax rate (%)||28.3||30.2||32.7|
|PAT margin (%)||8.6||11.3||(260) bps||10.2||(155) bps|
|Ann. EPS (Rs)||31.1||34.5||(10.0)||35.8||(13.1)|
|Revenues (Rs mn)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|Natural Gas transmission||9,845||9,800||0.5||9,152||7.6|
|Natural Gas Trading||96,970||75,754||28.0||92,421||4.9|
|LPG & Liquid Hydrocarbons||7,695||9,887||(22.2)||10,723||(28.2)|
|Realizations (Rs/unit)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|Natural Gas transmission||92.9||82.4||12.8||83.3||11.4|
|Natural Gas Trading||1,197.2||901.8||32.7||1,111.5||7.7|
|LPG & Liquid Hydrocarbons||21.3||26.2||(18.5)||33.3||(36.0)|
* adjusted for one-off on LPG pipeline retrospective revision
While volumes decline… realizations support revenue growth
Gail (India) Ltd reported net sales of Rs113.9bn, an increase of 17.1% yoy and 2.5% qoq with the improvement mainly led by the gas trading segment. Although the gas trading segment saw its volumes decline by 3.6% yoy and 2.6% qoq but benefited from improved realizations (surge of 32.7% yoy and 7.7% qoq).
In the gas transmission business the volumes continued to witness declines (10.9% yoy; 3.5% qoq) on back of falling KG-D6 production. With declining volumes, the business was able to report flattish revenue performance (+0.5% yoy) on back of 12.8% yoy improvement in realizations. On a sequential basis the realizations looked better majorly owing to a ~Rs230mn one time retrospective tariff revision taken (Dadri-Bawana pipeline) in Q1 FY13. In the LPG transmission business, while both the volumes handled (+2.1% yoy) and the realizations (+6.1% yoy) improved, a one time retrospective tariff revision for the LPG pipeline of Jamnagar-Loni led to de-recognizing Rs1.23bn of the segment sales in the quarter.
Petrochemical segment recorded a strong sequential surge in volumes (+53% qoq; partly explained by the shutdown taken in Q1 FY13), but volumes were still lower 21.7% yoy indicating a weak demand environment.
Petrochemical EBIT margin records a 10 quarter high… Other segments witness declines
Petrochemical segment saw its EBIT margins improve to 47.5% driven by better product prices observed during the quarter. In the gas trading segment the EBIT margins declined by 126bps yoy and 284bps qoq. The pronounced fall on a sequential basis was explained by the exceptionally higher EBIT recorded in Q1 FY13 on back of one off gains on higher number of spot cargos (inventory carried forward).
The LPG and Liquid hydrocarbons segment was plagued by higher subsidies and lower prices which reflected in a sharp fall at EBIT level. For Q2 FY13, GAIL accounted for a subsidy share of Rs7,857mn as compared to Rs5,666mn in Q2 FY12 and Rs7,000mn in Q1 FY13. The provisioning was higher than our estimates.
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