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GAIL: A Good Show - Views on News from Equitymaster
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GAIL: A Good Show
Mar 27, 2017

GAIL (India) Ltd has announced results for the quarter ended December 2016. The company has reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY. Here is a summary of the results.

Performance summary
  • GAIL has reported 9.4% YoY decline in the revenues in the quarter ended December 2016 (3QFY17).
  • While the physical performance was decent, APM gas price and realizations on petchem polymers were lower as compared to previous quarters.
  • The capacity utilization at Petchem plant stands at 80% and most of the gas being used is LNG. The petchem plant is currently using 5 to 6 mscmd of gas. The operating cost for the petchem segment has come down with plant optimization and stabilization.
  • In gas marketing segment, despite the LNG spot prices moving up, the company has not seen impact on volumes. In fact, volume on a quarter on quarter basis. Trading margin, however, has come down on a QoQ basis due to increase in spot LNG price.
  • Domestic gas transmission volumes for the quarter stood at 103 mscmd, of which 53 mscmd (around 51%) was domestic gas.
  • LPG transmission volumes are also witnessing growth. At 2.5 million tons capacity, the utilization has been full.
  • Margins in the LPG and other OLHC segment witnessed significant improvement due to lower input gas cost and better realizations.
  • Operating profit for the quarter grew 54.6% YoY, with operating profit margin at 14.1% (up from 8.2% in 3QFY16). This was supported by strong performance across segments, (including other segment -GAILTEL, E&P, power generation) barring gas marketing segment.
  • Net profit for the quarter grew 45.4% YoY, with net profit margin at 8.1%, up from 5.1%. The subsidy burden on LPG was nil.
  • For 9MFY17, the topline declined 13.3% YoY. Operating profit and net profit for the nine months grew 65.9% YoY and 132.6% YoY respectively. The operating profit margin and net profit margin for the company stood at 13.8% and 9.4% respectively, significantly higher on a YoY basis.
  • The management has issued one bonus share for existing three shares and has proposed an interim dividend worth Rs 8.5 per share.

    Financial Summary
    (Rs m) 3QFY16 3QFY17 YoY ch.(%) 9MFY16 9MFY17 YoY ch.(%)
    Net Sales 133,572 121,079 -9.4% 399,329 346,330 -13.3%
    Other operating income 468 246 -47.6% 1,284 639 -50.2%
    Expenditure 122,563 104,064 -15.1% 370,460 298,428 -19.4%
    Operating profit (EBDITA) 11,008 17,015 54.6% 28,869 47,902 65.9%
    EBDITA margin (%) 8.2% 14.1% 7.2% 13.8%
    Other income 2,634 2,756 4.6% 6,721 11,979 78.2%
    Interest (net) 1,524 1,601 5.1% 6,469 4,574 -29.3%
    Depreciation 3,356 3,579 6.6% 9,666 10,497 8.6%
    Profit before tax 9,230 14,836 60.7% 20,738 45,449 119.2%
    Pretax margin (%) 6.9% 12.3% 5.2% 13.1%
    Tax 2,472 5,007 102.5% 6,795 13,021 91.6%
    Effective tax rate (%) 26.8% 33.7% 32.8% 28.7%
    Profit after tax/(loss) 6,758 9,829 45.4% 13,943 32,427 132.6%
    Net profit margin (%) 5.1% 8.1% 3.5% 9.4%
    No. of shares (m)^ 1,691
    Diluted earnings per share (Rs)* 17.9
    Price to earnings ratio (x)* 21.0

    *On a trailing 12-month basis
    ^ Adjusted for bonus


    Cost Breakup
    (Rs m) 3QFY16 3QFY17 YoY ch.(%) 9MFY16 9MFY17 YoY ch.(%)
    Raw material 108,720 90,971 -16.3% 330,348 260,516 -21.1%
    as a % of sales 81.4% 75.1% 82.7% 75.2%
    Employee expense 2,520 2,665 5.7% 7,439 7,854 5.6%
    as a % of sales 1.9% 2.2% 1.9% 2.3%
    Other expense 11,323 10,427 -7.9% 32,673 30,058 -8.0%
    as a % of sales 8.5% 8.6% 8.2% 8.7%
    Total expense 122,563 104,064 -15.1% 370,460 298,428 -19.4%
    as a % of sales 91.8% 85.9% 92.8% 86.2%

    Segmental breakup
    Segment Revenue (Rs m) 3QFY16 3QFY17 YoY ch.(%) 9MFY16 9MFY17 YoY ch.(%)
    Natural Gas transmission
    Sales 9,789 12,140 24.0% 29,639 34,322 15.8%
    EBIT 4,207 6,267 49.0% 13,726 18,245 32.9%
    EBIT Margin (%) 43.0% 51.6% 46.3% 53.2%
    LPG transmission
    Sales 1,127 1,406 24.7% 3,613 3,748 3.7%
    EBIT 536 625 16.6% 1,941 1861 -4.1%
    EBIT % 47.5% 44.4% 53.7% 49.6%
    Natural Gas Marketing
    Sales 116,866 94,144 -19.4% 344,856 270,071 -21.7%
    EBIT 4,835 3,005 -37.8% 10,146 10,517 3.7%
    EBIT % 4.1% 3.2% 2.9% 3.9%
    Petrochemicals
    Sales 8,041 14,057 74.8% 22,599 38,797 71.7%
    EBIT -1,635 1,341 NA -6,980 3,824 -154.8%
    EBIT % -20.3% 9.5% -30.9% 9.9%
    LPG and OLHC
    Sales 8,479 8,259 -2.6% 25,659 22,031 -14.1%
    EBIT 2,315 3,735 61.3% 5,781 7,348 27.1%
    EBIT % 27.3% 45.2% 22.5% 33.4%
    Others (GAILTEL, E&P, Power Generation)
    Sales 2,120 1,732 -18.3% 6,354 5,250 -17.4%
    EBIT -127 515 NA 1,635 1,173 -28.3%
    EBIT % -6.0% 29.8% 25.7% 22.3%
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