>GAIL LIMITED: Results inline, maintain Accumulate

⇒ Results were inline with our estimate, with EBIDTA at Rs.16.7bn and PAT at Rs10.9bn. Subsidy payout for Q2FY12 grew by 64% YoY to Rs5.67bn


⇒ Revenue from natural gas transmission declined marginally by 1.1% to Rs.9.1bn, While trading business grew by 20.3% to Rs.67.3bn YoY respectively


⇒ Transmission and trading volume grew by 2.4% to 118.6mmscmd and 2.8% to 84mmscmd on QoQ respectively, mainly driven by higher volume offtake of spot and APM gas


⇒ Accumulate with TP of Rs.510, given its dominant market share in transmission business and expected volume growth. Subsidy sharing remains a key overhang on the stock


Highlights of the results
GAIL reported results which were inline with our estimates. Revenue for the quarter was
at Rs97.2bn (against our expectation of Rs.95bn), growth of 19.7% YoY, mainly due to
better performance from petrochemical and LPG & other LHC segment. EBITDA during
the quarter was at Rs.16.7bn, growth of 15%, YoY. During the quarter the company
reported net profit of Rs.10.9bn, (as against our estimate of Rs.10.7bn), growth of
18.5% YoY. Subsidy payout stood at Rs.5.7bn growth of 64% YoY, mainly due to higher
crude oil prices during the quarter.


Better performance from Petrochemical and other LHC segment drives the revenue and profitability in Q2 FY12
Revenue has increased by 19.7% to Rs.97.2bn in Q2 FY12, mainly due to higher volume growth and higher realisation in both Petrochemical and other LHC segment backed by strong pickups in domestic demand. Petrochemical revenue grew by 28.9% YoY and 47.8% QoQ to Rs.9.2bn. Petrochemical volume and realisation grew by 20.6% to 0.13mnt and 7% to $1540/mt YoY respectively. While other liquid hydrocarbon revenue jumped by 34% YoY and 21.4% QoQ to Rs.9.8bn. other liquid hydrocarbon volume and realisation grew by 9% to 0.38mnt and 23% to $560/mt YoY respectively.


Transmission volume and tariff grew marginally by 1.3% and 1.9% respectively on QoQ, mainly driven by higher offtake of spot and APM volumes.
Natural gas transmission volume and tariff gained marginally by 1.3% to 118.6mmscmd and 1.9% to 0.84/scm respectively on QoQ, mainly driven by higher volume offtake of spot and APM gas. However transmission EBIT margin has declined sequentially by 56bps to 3.8% mainly due to higher other expenditure (forex loss on ECB and bad debts provision). We believe transmission volume for Q3 FY12 would be around 119- 121mmscmd.


Subsidy payout for Q2FY12 grew by 64% YoY to Rs5.67bn
During the quarter, subsidy payout stood at Rs.5.7bn, growth of 64% YoY. Also share of subsidy burden has increased sequentially from 5% to 8%. However, subsidy payout declined by 17% sequentially mainly led by duty reduction in petroleum product and recent price hike in LPG, Kerosene and Diesel.


To read the full report: GAIL