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GAIL: Net profits rise 13% - Views on News from Equitymaster
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GAIL: Net profits rise 13%
Jan 24, 2012

Gas Authority Of India Ltd. (GAIL) has announced the third quarter results for financial year 2011-2012 (3QFY12). The company has reported 34.7% year on year (YoY) growth in top line and 12.8% YoY growth in the bottom-line for the quarter. Here is our analysis of the results.

Performance summary
  • Top line soared 34.7% YoY during the quarter. For the first nine months, the growth in the topline came at 26.6% YoY.
  • Operating profits registered a growth of 34.6% YoY during the quarter with margins at 15.9%, same as last year. For the nine months, the operating profits were up 18.9% YoY with margins at 16.9% (down 1.1% YoY).
  • Net profits were up 12.8% YoY during the quarter with margins at 9.7% versus 11.5% last year. For the nine months, the bottomline was up 14.1%, with net profit margins at 10.6% versus 11.8% last year. Net profits were up mainly on account of increase in natural gas trading, natural gas transmission, Petrochemicals and liquid hydrocarbons division.

Standalone performance summary
(Rs m) 3QFY11 3QFY12 Change 9mFY11 9mFY12 Change
Sales 83,836 112,942 34.7% 236,276 299,096 26.6%
Expenditure 70,505 94,993 34.7% 193,829 248,619 28.3%
Operating profit (EBDITA) 13,331 17,949 34.6% 42,447 50,476 18.9%
EBDITA margin (%) 15.9% 15.9%   17.97% 16.9%  
Other income 1,906 214 -88.8% 3,882 2,020 -48.0%
Interest (net) 164.5 207.3 26.0% 487.3 641.4 31.6%
Depreciation 1,605 1,975 23.0% 4,831 5,764 19.3%
Profit before tax 13,467 15,980 18.7% 41,011 46,091 12.4%
Pretax margin (%) 16.1% 14.1%   17.4% 15.4%  
Tax 3,791 5,066 33.6% 13,231 14,386 8.7%
Profit after tax/(loss) 9,676 10,914 12.8% 27,781 31,705 14.1%
Net profit margin 11.5% 9.7%   11.8% 10.6%  
No. of shares (m)         1,269  
Diluted earnings per share (Rs)*         31.2  
Price to earnings ratio (x)**         11.9  
*On a trailing 12 months basis
  • Segmentwise, natural gas sales volumes were up 2% YoY, petrochemical production was up 16%, polymer sales were up 40% YoY, LPG and Other liquid hydrocarbon sales was up 9% YoY. However, LPG transmission declined by 3% in terms of volumes and Natural Gas transmission volumes were down by 1% YoY. For segment financials, please check the table below

    Segmental Performance
    (Rs m) 3QFY11 3QFY12 Change 9mFY11 9mFY12 Change
    Natural Gas transmission            
    Revenues 10,008 10,872 8.6% 28,771 30,061 4.5%
    PBIT 6,657 6,208 -6.7% 20,269 18,291 -9.8%
    PBIT margins 66.5% 57.1%   70.4% 60.8%  
    LPG transmission            
    Revenues 1,292 1,216 -5.9% 3,569 3,456 -3.2%
    PBIT 844.2 775.3 -8.2% 2,365 2,187 -7.5%
    PBIT margins 65.3% 63.8%   66.3% 63.3%  
    Natural gas trading            
    Revenues 67,728 91,495 35.1% 185,139 2,239,303 1109.5%
    PBIT 2,059 3,230 56.9% 5,240 9,227 76.1%
    PBIT margins 3.0% 3.5%   2.8% 0.4%  
    Petrochemicals            
    Revenues 5,713 8,780 53.7% 19,298 24,525 27.1%
    PBIT 1,954 3,875 98.3% 7,516 10,349 37.7%
    PBIT margins 34.2% 44.1%   38.9% 42.2%  
    Liquid hydrocarbons            
    Revenues 7,283 9,654 32.6% 22,465 27,680 23.2%
    PBIT 1,501 3054.8 103.6% 5,586 8861.2 58.6%
    PBIT margins 20.6% 31.6%   24.9% 32.0%  
    Others            
    Revenues 151.1 344.2 127.8% 445.7 821.1 84.2%
    PBIT -167.1 -435.7 na -783.3 -1,589 na
    PBIT margins na na   na na  

What to expect?
The stock is currently trading at Price to earnings (PE) ratio of 11.9 (on the basis of trailing 12 months) which we believe is not expensive considering the growth potential of the company. As the domestic gas supplies are on a decline, the demand for LNG (liquefied natural gas) is expected to remain high and GAIL seems to be in a sweet spot with its long and short term contracts. The company will soon host results conference call. We will incorporate the details of the same in our forecasts and keep our subscribers updated.

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