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GAIL: The juggernaut rolls on...

Apr 30, 2001

For the current quarter Gas Authority of India Ltd. (GAIL) has reported a moderate increase in topline as compared to the first two quarters of the previous fiscal wherein the company reported a significant turnover growth. This could be due to its petrochemical plant in U.P stabilising operations in 3QFY00. Consequently, YoY the effect has been reduced.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Sales 23,889 25,708 7.6% 84,153 100,515 19.4%
Other Income 171 431 151.5% 1,493 1,306 -12.5%
Expenditure 19,548 19,687 0.7% 68,779 78,961 14.8%
Operating Profit (EBDIT) 4,341 6,021 38.7% 15,374 21,554 40.2%
Operating Profit Margin (%) 18.2% 23.4%   18.3% 21.4%  
Interest 383 515 34.4% 1,668 1,848 10.8%
Depreciation 1,330 1,281 -3.7% 4,886 5,161 5.6%
Profit before Tax 2,799 4,657 66.3% 10,313 15,851 53.7%
Tax 560 1,300 132.2% 1,700 4,300 153.0%
Profit after Tax/(Loss) 2,239 3,356 49.9% 8,613 11,551 34.1%
Net profit margin (%) 9.4% 13.1%   10.2% 11.5%  
No. of Shares (eoy) 846 846   846 846  
Diluted Earnings per share* 10.6 15.9   10.2 13.7  
P / E Ratio   3.3     3.8  

The operating profits have registered impressive growth. This seems to be largely driven by higher volume transport and better realisations. Consequently, the OPM has increased by 310 basis points and the company has maintained higher margins for all the quarters as compared to FY00. This could be due to greater control on operating costs in their pipeline business. Further, margins may have been positively impacted with the commissioning of the petrochemical (polymer) plant. GAIL operates a gas cracker, which involves lower operating costs as compared to naphtha crackers.

With the company completing all of its planned expenditure the depreciation charge has remained flat. Consequently, pre-tax profits have grown significantly resulting in higher tax outgo. The effective tax YoY has increased from 16.5% to 27.1% for the year ended March '01.

The company has capitalised Rs 742.6 m on account of exchange rate variations arising due to the repayment of foreign exchange debt raised for the GREP project. The statutory auditor has opined that this amount should be passed through the income statement. The matter is being referred to the Expert Advisory Committee of ICAI. Adjusting this amount in FY01 the bottomline shows a growth of 25.5% YoY with an eps of Rs 12.8.

At Rs 52 the company is trading on a multiple of 3.3x on 4QFY01 annualised earnings. For FY01, Gail is trading on a multiple of 3.8x earnings with a m cap to sales ratio of 0.4x.

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