Key takeaway: GAIL’s EBITDA missed JEFe by 10% on a giant miss in fuel buying and selling even because the petrochemical section beat JEFe handsomely. Transmission put up a robust present with vol +1% y/y regardless of a drop in LNG imports. Petrochemicals volumes and realization shocked positively. We increase FY22E EPS by 6% and keep our Maintain ranking as we see the stock as absolutely valued within the absence of an additional rally within the crude worth.
EBITDA miss: GAIL’s EBITDA got here in 10% beneath JEFe on a big miss within the buying and selling section even because the petrochemical section got here in forward of JEFe. Decrease than anticipated depreciation and better different revenue helped PAT beat JEFe by 4%.
Gasoline Transmission regular: The Gasoline Transmission section’s EBITDA was in step with our estimates. Transmission vol was +1% y/y whilst LNG imports into India declined 12% y/y, indicating a profit from new home manufacturing.
Massive miss in Gasoline Buying and selling: Buying and selling vol declined 6.5% y/y and EBITDA got here in sharply beneath our estimate, buffeted by low demand for spot LNG that noticed a spike in worth within the early a part of the quarter. The prevailing sturdy crude worth is supportive of buying and selling profitability whilst spot costs stay elevated (> US$ 10/mmbtu), implying some affect on volumes.
Robust present in petchem: Petchem vol +34% y/y was considerably forward of JEFe. Realizations at 7% premium to import parity indicated very sturdy home demand. Volumes are more likely to be impacted by the pandemic associated restrictions in 1QFY22E however profitability ought to stay sturdy if the crude worth sustains present ranges.
LPG section margin improved however volumes delicate: LPG vol -15% y/y got here in decrease than JEFe however margins improved sharply on decrease value, regardless that the home fuel worth was flat. LPG realization softened significantly in 1QFY22E, possible weighing on profitability.
Sizable pipeline InvIT may rerate stock: The proposed InvIT may re-rate the valuation a number of of transmission enterprise from 6.5x to 9x lifting GAIL’s truthful worth 20% (Rs 30/sh) offered sizable property are transferred. However a small providing seems possible given three pipelines contribute 70% of revenues.
Keep Maintain: We increase FY22E estimates by 6% on increased petchem profitability holding FY23E broadly unchanged. We modestly increase our SOTP to Rs 150 (from Rs 145). We see restricted upside potential within the stock except crude rallies farther from present ranges.