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GAIL: Petchem Division Turns Around - Views on News from Equitymaster
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GAIL: Petchem Division Turns Around
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.

Performance summary
  • Net sales for the quarter declined 14.6% YoY. In terms of physical performance, volumes were higher across segments barring LPG/OLHC.
  • Overall operating margin, however, improved significantly, from 8.1% in 1QFY16 to 14.7% during the quarter. This was mainly on account of petchem division turning from losses to profits, (mainly due to lower gas cost). Utilization in the petchem segment improved due to better offtake in the volumes, up 149% YoY.
  • Growth in the operating profits in natural gas transmission and trading further supported the margins. Margins were higher for LPG and OLHC segment as well.
  • Other income witnessed a sharp surge of 569% YoY and includes Rs 4.9 bn from partial offloading of shares in Mahanagar Gas Ltd through IPO. Net profit margin benefitted from a lower effective tax rate.

    Financial Summary
    (Rs m) 1QFY16 1QFY17 YoY ch.(%)
    Net Sales 125,190 106,866 -14.6%
    Other operating income 256 201 -21.5%
    Expenditure 115,088 91,134 -20.8%
    Operating profit (EBDITA) 10,103 15,731 55.7%
    EBDITA margin (%) 8.1% 14.7%
    Other income 905 6,054 569.0%
    Interest (net) 2,159 1,774 -17.8%
    Depreciation 3,084 3,354 8.8%
    Exceptional items 0 0
    Profit before tax 6,021 16,858 180.0%
    Pretax margin (%) 4.8% 15.8%
    Tax 2,140 3,506 63.8%
    Effective tax rate (%) 35.5% 20.8%
    Profit after tax/(loss) 3,881 13,352 244.0%
    Net profit margin (%) 3.1% 12.5%
    No. of shares (m) 1268
    Diluted earnings per share (Rs)* 25.3
    Price to earnings ratio (x)* 15.4

    *On a trailing 12-month basis


    Segment breakup
    Segment revenue 1QFY16 1QFY17 YoY ch.(%)
    Natural Gas transmission
    Sales 9,248 10,318 11.6%
    EBIT 3,898 5,554 42.5%
    EBIT Margin (%) 42.2% 53.8%
    LPG transmission
    Sales 1,362 1,076 -21.0%
    EBIT 816 526 -35.6%
    EBIT % 59.9% 48.8%
    Natural Gas Marketing
    Sales 105,811 83,286 -21.3%
    EBIT 3,410 4,219 23.7%
    EBIT % 3.2% 5.1%
    Petrochemicals
    Sales 5,816 11,330 94.8%
    EBIT -2,967 930 nm
    EBIT % -51.0% 8.2%
    LPG and OLHC
    Sales 9,566 6,735 -29.6%
    EBIT 2,756 2,144 -22.2%
    EBIT % 28.8% 31.8%

    Cost breakup
    (Rs m) 1QFY16 1QFY17 YoY ch.(%)
    Raw material 103,382 79,784 -22.8%
    82.6% 74.7%
    Employee expense 2,413 2,694 11.6%
    1.9% 2.5%
    Other expense 9,292 8,657 -6.8%
    7.4% 8.1%
    Total expense 115,088 91,134 -20.8%
    91.9% 85.3%
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