Supply to buy: This natural gas supply can give 43% yield: Guided Capex of Rs. 75b: Motilal Oswal

Target price, current market price, and market capitalization

Target price, current market price, and market capitalization

The current market price (CMP) of GAIL is Rs. 144. Motilal Oswal has an estimated Target Price for the supply at Rs. 205. Stock is expected to give a 43% return, in 1 year. The company is a large cap company with a market capitalization of Rs. 66,605 crore.

Stock Outlook
Current Market Price (CMP) Rs. 144
Legal price Rs. 205
Potential 1 year back 43.00%
52 week high share price Rs. 173.50
52 week low share price Rs. 125.20

GAIL reported a well-performing quarter in 4QFY22. The operational performance for transfer and petrochemicals decreased on a YoY basis. The management led to an increase of 5-6 mmscmd in gas trading volumes in FY23. In addition, in FY 22, EBITDA stood at Rs. 138B, up 115% YoY, led by a strong performance in the Trading business. In Q4FY22, EBIT from the Gas / LPG transfer company stood at Rs. 8.7b / Rs. 0.8b, down 8% QoQ, but 4% JoY. EBIT for the trading company came in at Rs. 17.2b. Petchem EBIT stood at Rs. 3.8b down 38% JoY, but up 4% QoQ. LPG and HC EBIT were lower than our estimate at Rs. 7.2b, up 54% JoY, but down 15% QoQ.

GAIL's stock benefits, and risks: Motilal Oswal

GAIL’s stock benefits, and risks: Motilal Oswal

Mentioning the benefits, Motilal Oswal stated: “It is carrying out various projects worth Rs. 300b, spread over the next 3 years. The petchem factory is currently operating at a utilization rate of 113% in 4QFY22. It will be a use level reached 115% .in FY23 due to the opening of the economy and better demand of the PATA plant.Petchem margin fell 26% / 28% / 31% QoQ in May’22 for PE / PP / PVC, but we expect to improve the same in the short term.In use and construction of various fertilizer plants are expected by Oct’22, which should help the volumes.In use of the new fertilizer plant in Sindri, Barauni and Gorakhpur the demand will increase and help profitability move forward.-line 4QFY22, we keep our estimates unchanged for FY23-24.We value the core business at 10x FY24E adjusted EPS of Rs 17. PAT stood at Rs 103B, up 112% YoY, translated into an EPS of Rs 22.8, up 110%. “

However, the risks remain; the company informed, “EBITDA came in 4% lower than our estimate at Rs. 37.1b (up 45% YoY, but down 12% QoQ) due to poor performance by the Petchem and LPG segment. PAT stood at Rs. 26.8b ( 7% lower than our estimate; up 41% YoY but down 18% QoQ), translating into an EPS of Rs. 5.8. “

About the company: GAIL

About the company: GAIL

GAIL is India’s leading natural gas company with diversified interests in the natural gas value chain of trade, transmission, LPG production and transmission, LNG gasification, petrochemicals, city gas, E&P, etc. It owns and operates a network of approximately 13,340 km of natural gas pipelines spread across the country. GAIL manages ~ 70% market share in gas transmission and has a Gas Trading share of more than ~ 50% in India. GAIL and its subsidiaries / JVs also have a formidable market share in City Gas Distribution, with a large portfolio in the Liquefied Natural Gas (LNG) market. The company is expanding its presence in renewable energy such as solar, wind and biofuels.

Gas transmission volumes fell to 114 mmscmd (-2% YoY) in 4QFY22. The management expects volumes of ~ 120mmscmd when the manure plants run at full use. The Transmission company is expected to grow at 8-10% CAGR over the next 3 years. Use of the company’s Urja Ganga pipeline will increase by 60-75% by the end of FY23.

Disclaimer

Disclaimer

The above stock was extracted from the brokerage report of Motilal Oswal. Investing in stocks carries a risk of financial losses. Investors should therefore be careful. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses incurred as a result of decisions based on the article.


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