GAIL (India) Ltd (Q3 FY13)

India Infoline News Service | Mumbai |

Maintain Market Performer with a 9-month target price of Rs366

CMP Rs335, Target Rs366, Upside 9.2% 
  • Net sales rise 10.7% yoy driven by higher revenues from the natural gas trading segment (+10.6% yoy)
  • Gas transmission volumes fall 11.8% yoy and 1% qoq in line with falling natural gas production at the KG-D6 field. Petrochemical segment sales volumes spurted 13.3% yoy and 26.7% qoq
  • OPM at 16% improved by 12bps yoy and 362bps qoq.
  • Amongst segmental EBIT margins, LPG transmission EBIT margins dived to 16.2% from 63.8% in Q3 FY12 post the LPG pipeline tariff cut implemented in Q2 FY13.
  • Subsidy burden per tonne of LPG was higher by 41.6% yoy. Total payout in the quarter towards subsidy was Rs70bn. 
  • Maintain Market Performer with a 9-month target price of Rs366
Result table
(Rs m) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 125,042 112,942 10.7 113,929 9.8
Material costs (7,852) (6,574) 19.4 (7,017) 11.9
Purchases (86,941) (78,396) 10.9 (83,005) 4.7
Personnel costs (1,683) (1,857) (9.4) (1,736) (3.1)
Other overheads (8,545) (8,166) 4.6 (8,051) 6.1
Operating profit 20,021 17,949 11.5 14,120 41.8
OPM (%) 16.0 15.9 12 bps 12.4 362 bps
Depreciation (2,424) (1,975) 22.7 (2,491) (2.7)
Interest (552) (207) 166.2 (261) 111.3
Other income 1,542 214 622.2 2,368 (34.9)
PBT 18,587 15,980 16.3 13,736 35.3
Tax (5,738) (5,066) 13.3 (3,882) 47.8
Effective tax rate (%) 30.9 31.7
28.3
PAT 12,849 10,914 17.7 9,854 30.4
PAT margin (%) 10.3 9.7 61 bps 8.6 163 bps
Ann. EPS (Rs) 40.5 34.4 17.7 31.1 30.4
Source: Company, India Infoline Research


Segmental performance
Revenues (Rs mn) Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Natural Gas transmission 9,894 10,872 (9.0) 9,845 0.5
LPG transmission 808 1,216 (33.5) 1,191* (32.2)
Natural Gas Trading 101,180 91,495 10.6 96,970 4.3
Petrochemicals 11,070 8,780 26.1 8,798 25.8
LPG & Liquid Hydrocarbons 12,772 9,654 32.3 7,695 66.0
Realizations (Rs/unit) Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Natural Gas transmission 94.2 91.4 3.1 92.9 1.4
LPG transmission 1.1 1.4 (21.0) 1.5* (26.1)
Natural Gas Trading 1,233.9 1,076.4 14.6 1,197.2 3.1
Petrochemicals 86.5 77.7 11.3 87.1 (0.7)
LPG & Liquid Hydrocarbons 37.6 26.7 40.5 21.3 76.2
Source: Company, India Infoline Research 
* adjusted for one-time on LPG pipeline retrospective revision

Transmission volumes decline but Petrochemical volume spurts up
Transmission volumes continued to decline with natural gas transmission volumes falling by 11.8% yoy and LPG transmission volumes declining by 15.8% yoy. However, petrochemicals segment recorded healthy production volumes of 126,000mt implying a robust growth of 7.7% yoy and 11.5% qoq. In LPG and other hydrocarbon volumes a decline of 4.2% yoy was noted on back of lower LPG production.

Operational performance

Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Natural Gas transmission (mmscmd) 105.0 119.0 (11.8) 106.0 (0.9)
LPG transmission ('000 MT) 733.0 871.0 (15.8) 813.0 (9.8)
Natural Gas Trading (mmscmd) 82.0 85.0 (3.5) 81.0 1.2
Petrochemicals ('000 MT) 128.0 113.0 13.3 101.0 26.7
LPG ("000 MT) 261.0 283.0 (7.8) 287.0 (9.1)
Liquid Hydrocarbons ('000 MT) 79.0 78.0 1.3 74.0 6.8
Source: Company, India Infoline Research

Sales come in 7% ahead of estimates on back of higher gas trading revenues
Gail (India) Ltd reported net sales of Rs125bn (+7% ahead of our expectations) indicating an increase of 10.7% yoy and 9.8% qoq. Natural gas trading segment revenues came in at Rs101.2bn (+10.6% yoy) on back of 14.6% increase in realizations and were 4% ahead of our estimates. LPG/Liquid hydrocarbon segment also surprised with better than expected realizations and despite a slightly lower production (-4.2% yoy) the revenues in the segment grew by robust 32.3% yoy. Among other segments, while petrochemical segment revenues at Rs11.1bn grew by 26.1% yoy, Natural gas and LPG transmission segments witnessed revenue declines of 9% yoy and 33.5% yoy respectively. 

Stellar performance in LPG/Liquid hydrocarbon segment… but LPG transmission EBIT hit severely post pipeline tariff cut
In the LPG transmission segment we noticed a sharp fall at EBIT level on back of the LPG pipeline tariff cut implemented in the quarter (one time retrospective hit was taken in Q2 FY13).  The EBIT margins in LPG transmission segment tanked to 16.4% from 63.8% observed in Q3 FY12. However the LPG and liquid hydrocarbon segment reported a stellar performance and EBIT margins of 46.4% came in much ahead of our expectations. The EBIT contribution of the segment improved to 31.5% from 18.3% in Q3 FY12. Petrochemical segment witnessed pressure on EBIT level as the margins declined by 443bps yoy and 783bps qoq.

Segmental performance
EBIT margin (%) Q3 FY13 Q3 FY12 bps yoy Q2 FY13
BSE 491.50 [0.45] ([0.09]%)
NSE 491.80 [0.10] ([0.02]%)

***Note: This is a NSE Chart

 

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