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Motilal Oswal Report
GAIL India Ltd. reported Ebitda at Rs 24.3 billion in Q1 FY24, 11% below our estimate of Rs 27.3 billion due to a weak performance in petchem segment.
Petchem segment reported Ebit loss for the fourth consecutive quarter due to a weak pricing environment.
The management highlighted that if prices remain at current levels, gas prices need to cool down to $10-11/metric million British thermal unit from $13/mmBtu in Q1 FY24 for petchem segment to breakeven.
Transmission segment recorded a benefit of Rs 6.6 billion in Q1 FY24 due to a tariff hike implemented on April 01, 2023. The benefit is expected increase going ahead as volumes ramp up further.
GAIL India's management expects gas transmission volumes to reach 123 mmscmd by the end of FY24 and ~138- 140 mmscmd over the next two-three years from 116 mmscmd currently.
Owing to the underperformance in Q1 FY24, we cut our FY24E Ebitda/profit after tax by 12% while keeping FY25 estimates broadly unchanged.
We value the core business at 10 times FY25E adjusted EPS of Rs 12. Adding the value of listed and unlisted investments of Rs 25, we arrive at a target price of Rs 145/share. Maintain 'Buy'.
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