Key takeaway: GAIL’s EBITDA missed JEFe by 10% on a large miss in gas trading even as the petrochemical segment beat JEFe handsomely. Transmission place up a sturdy show with vol +1% y/y in spite of a drop in LNG imports. Petrochemicals volumes and realization shocked positively. We raise FY22E EPS by 6% and retain our Hold rating as we see the stock as completely valued in the absence of a additional rally in the crude price tag.
EBITDA miss: GAIL’s EBITDA came in 10% under JEFe on a huge miss in the trading segment even as the petrochemical segment came in ahead of JEFe. Lower than anticipated depreciation and greater other revenue helped PAT beat JEFe by 4%.
Gas Transmission steady: The Gas Transmission segment’s EBITDA was in line with our estimates. Transmission vol was +1% y/y even as LNG imports into India declined 12% y/y, indicating a advantage from new domestic production.
Large miss in Gas Trading: Trading vol declined 6.5% y/y and EBITDA came in sharply under our estimate, buffeted by low demand for spot LNG that saw a spike in price tag in the early portion of the quarter. The prevailing sturdy crude price tag is supportive of trading profitability even as spot rates stay elevated (> US$ 10/mmbtu), implying some effect on volumes.
Strong show in petchem: Petchem vol +34% y/y was drastically ahead of JEFe. Realizations at 7% premium to import parity indicated extremely sturdy domestic demand. Volumes are probably to be impacted by the pandemic associated restrictions in 1QFY22E but profitability must stay sturdy if the crude price tag sustains present levels.
LPG segment margin enhanced but volumes soft: LPG vol -15% y/y came in reduced than JEFe but margins enhanced sharply on reduced expense, even although the domestic gas price tag was flat. LPG realization softened significantly in 1QFY22E, probably weighing on profitability.
Sizable pipeline InvIT could rerate stock: The proposed InvIT could re-price the valuation several of transmission business enterprise from 6.5x to 9x lifting GAIL’s fair worth 20% (Rs 30/sh) offered sizable assets are transferred. But a modest providing appears probably provided 3 pipelines contribute 70% of revenues.
Maintain Hold: We raise FY22E estimates by 6% on greater petchem profitability maintaining FY23E broadly unchanged. We modestly raise our SOTP to Rs 150 (from Rs 145). We see restricted upside prospective in the stock unless crude rallies additional from present levels.