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GAIL: A Robust Quarter - Views on News from Equitymaster
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GAIL: A Robust Quarter
Dec 3, 2016

GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 15.7 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY. Here is a brief summary of the results.

Performance summary
  • The revenues for the quarter declined 15.7% YoY. This was mainly on account of lower year on year realizations for gas marketing, petchem and LPG and other OLHC (other liquid hydrocarbon) segments. That said, in terms of physical performance, all segments witnessed growth in volumes on a year on year basis. The growth was especially encouraging with regards to growth in volumes in the gas transmission segment.
  • Operating profit for the quarter grew 95.4% YoY while margins expanded to 12.8% from 5.5% in 2QFY16. One of the main reasons driving this expansion is year on year improvement in the performance of the petchem segment. The sales volume was up 62% YoY and lower gas cost supported profit at the EBIT level (versus losses in the corresponding quarter last year). The petchem plant is operating at a capacity utilization of 90%. Dry well write off led to one-time expense of Rs 0.9 bn.
  • Robust growth in the operating profit, along with fall in the interest expense and lower effective tax rate led to 180% YoY growth in the bottomline in 2QFY17. The net profit margin for the quarter expanded to 7.8% from 2.3% in the corresponding quarter last year.

    Financial Summary
    (Rs m) 2QFY16 2QFY17 YoY ch.(%) 1HFY16 1HFY17 YoY ch.(%)
    Net Sales 140,637 118,582 -15.7% 265757 225251 -15.2%
    Other operating income 559 192 -65.6% 816 394 -51.8%
    Expenditure 132,879 103,426 -22.2% 247,897 194,364 -21.6%
    Operating profit (EBDITA) 7,758 15,155 95.4% 17,860 30,887 72.9%
    EBDITA margin (%) 5.5% 12.8% 6.7% 13.7%
    Other income 3,182 3,169 -0.4% 4,086 9,223 125.7%
    Interest (net) 2,787 1,198 -57.0% 4,945 2,973 -39.9%
    Depreciation 3,226 3,563 10.5% 6,310 6,918 9.6%
    Exceptional items 0 0 0 0
    Profit before tax 5,487 13,755 150.7% 11,507 30,613 166.0%
    Pretax margin (%) 3.9% 11.6% 4.3% 13.6%
    Tax 2,182 4,508 106.6% 4,322 8,014 85.4%
    Effective tax rate (%) 39.8% 32.8% 37.6% 26.2%
    Profit after tax/(loss) 3,304 9,247 179.8% 7,185 22,598 214.5%
    Net profit margin (%) 2.3% 7.8% 2.7% 10.0%
    No. of shares (m) 1,268
    Diluted earnings per share (Rs)* 29.1
    Price to earnings ratio (x)* 14.8

    *On a trailing 12-month basis


    Segment breakup
    Segment Revenue (Rs m) 2QFY16 2QFY17 YoY ch.(%) 1HFY16 1HFY17 YoY ch.(%)
    Natural Gas transmission
    Sales 10,602 11,864 11.9% 19,850 22,182 11.7%
    EBIT 5,621 6,424 14.3% 9,519 11,978 25.8%
    EBIT Margin (%) 53.0% 54.1% 48.0% 54.0%
    LPG transmission
    Sales 1,124 1,266 12.6% 2,486 2,342 -5.8%
    EBIT 589 710 20.6% 1405 1236 -12.1%
    EBIT % 52.4% 56.1% 56.5% 52.8%
    Natural Gas Marketing
    Sales 122,180 92,642 -24.2% 227,991 175,927 -22.8%
    EBIT 1,901 3,292 73.2% 5,311 7,512 41.4%
    EBIT % 1.6% 3.6% 2.3% 4.3%
    Petrochemicals
    Sales 8,791 13,578 54.5% 14,558 24,740 69.9%
    EBIT -2,378 1,553 nm -5,345 2,483 nm
    EBIT % -27.1% 11.4% -36.7% 10.0%
    LPG and OLHC
    Sales 7,634 7,065 -7.5% 17,179 13,772 -19.8%
    EBIT 710 1,469 106.9% 3,466 3,613 4.2%
    EBIT % 9.3% 20.8% 20.2% 26.2%
    Others (GAILTEL, E&P, Power Generation)
    Sales 2,346 2,022 -13.8% 4,234 3,518 -16.9%
    EBIT 1,091 51 -95.3% 1,762 658 -62.7%
    EBIT % 46.5% 2.5% 41.6% 18.7%

    Cost breakup
    (Rs m) 2QFY16 2QFY17 YoY ch.(%) 1HFY16 1HFY17 YoY ch.(%)
    Raw material 118,246 89,760 -24.1% 221,628 169,544 -23.5%
    as a % of sales 84.1% 75.7% 83.4% 75.3%
    Employee expense 2,506 2,495 -0.4% 4,919 5,189 5.5%
    as a % of sales 1.8% 2.1% 1.9% 2.3%
    Other expense 12,127 11,171 -7.9% 21,350 19,631 -8.1%
    as a % of sales 8.6% 9.4% 8.0% 8.7%
    Total expense 132,879 103,426 -22.2% 247,897 194,364 -21.6%
    as a % of sales 94.5% 87.2% 93.3% 86.3%
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