Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GAIL: Going good - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • May 30, 2002

    GAIL: Going good

    Considering the performance of the economy and peers over the past twelve months, provisional results of Gas Authority of India (Gail) are satisfactory. In four quarters of FY02, turnover growth has fluctuated between 2% and 7% YoY. Full year gross sale numbers have come ahead of our expectations of 1% growth. This is likely due to lower estimates on gas volume sales.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Sales 25,780 26,633 3.3% 100,587 105,524 4.9%
    Other Income 545 522 -4.1% 1,420 1,926 35.6%
    Expenditure 19,418 20,629 6.2% 78,693 81,543 3.6%
    Operating Profit (EBDIT) 6,362 6,004 -5.6% 21,895 23,982 9.5%
    Operating Profit Margin (%) 24.7% 22.5%   21.8% 22.7%  
    Interest 638 513 -19.7% 1,971 2,257 14.5%
    Depreciation 1,940 1,723 -11.2% 5,821 6,111 5.0%
    Profit before Tax 4,328 4,291 -0.8% 15,522 17,539 13.0%
    Tax 1,633 1,080 -33.9% 4,260 5,830 36.8%
    Profit after Tax/(Loss) 2,695 3,211 19.2% 11,262 11,709 4.0%
    Net profit margin (%) 10.5% 12.1%   11.2% 11.1%  
    No. of Shares 845.7 845.7   845.7 845.7  
    Diluted Earnings per share* 12.7 15.2   13.3 13.8  
    P/E Ratio         5.7  

    In the four years to FY01, Gail had reported a compounded growth (CAGR) of 22% in topline, which suggests that growth in FY02 has hit a speed breaker. The higher growth in the concerned years was primarily driven by four key areas. LPG, which is among the fastest growing petroleum products. Polymers, which were commissioned in FY00 and respectable volume growth and improving realisations in gas transmission. Between FY98 to FY00, linkage of domestic gas prices to international rates increased from 55% to 75% in major markets. This could have cushioned the fall in energy prices during the concerned period.

    The Government has not revised gas prices after FY00 and with energy prices strengthening between FY00 and FY02, the ceiling on gas prices at 2,850/tscm has been triggered. Consequently, realisation growth is restricted. With most pipelines functioning on high operating rates, volume growth was likely to be challenging. Growth in FY02 is likely to have been generated from LPG transmission business (Jamnagar-Loni pipeline) and downstream businesses.

    The company has managed to increase operating margins by 90 basis points. This is primarily due to purchases, which constitute 77% of sales, remaining flat. This seems to indicate that volumes have not grown, if gas procurement prices remained unchanged. The effective tax rate during the year has declined from 27.4% to 24.8% (not including deferred taxes).

    In the current year, Gail is expected to increase capacity on the Jamnagar - Loni pipeline to 2.5 MMTPA. Also, the company has another LPG pipeline project of 600 km in the South from Vizag to Secunderabad at an estimated outlay of Rs 4.9 bn. As per reports, the company is planning on augmenting capacity along HBJ to 60 mmscmd. We reckon any such plans are likely to depend on the 5 MMTPA LNG terminal project at Dahej, which is scheduled to be completed by 2004.

    In the current year, Gail could experience growth in all its businesses, as the economy charts a recovery. LPG transmission is likely to be the fastest growing division, as it operates on a lower base. That said, with dismantling of the APM, it is a matter of time before gas prices are linked to international markets. As per reports, the Government, in two phases, could link international and domestic prices by FY04. The hike is likely to be graded, as key gas consumers belong to the sensitive power and fertiliser sector. Gail could face gas pricing risk, as the hike may not be entirely transferable.

    At Rs 79 the scrip is trading on a multiple of 5.7x. Over the past 12 months valuations have improved from 3.5x earnings. The scrip trades in a band of 3x-6x. With disinvestment fever, the scrip has benefited from its PSU status. The Government has identified Gail as a strategic asset and is not likely to divest in favour of a strategic investor. As per reports, cross-holding in the company could be offered in the primary market. With a mismatch in demand-supply for gas, the core business continues to remain strong.



    Equitymaster requests your view! Post a comment on "GAIL: Going good". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

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

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    GAIL: Petchem Division Turns Around (Quarterly Results Update - Detailed)

    Oct 19, 2016

    GAIL (India) Ltd has announced results for the quarter ended June 2016. The company has reported 14.6 % year on year (YoY) decline in sales, while bottom-line grew 244% YoY. Here is a brief summary of the results.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    GAIL: Better Prospects Ahead (Quarterly Results Update - Detailed)

    May 31, 2016

    GAIL has reported 9.8% and 28.7% YoY decline in the topline and bottomline for the year ended March 2016.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)



    Detailed Quarterly Results With Charts