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Motilal Oswal Report
GAIL India Ltd. reported Ebitda of Rs 38.2 billion in Q3 FY24, 10% above our estimate of Rs 34.7 billion. It was driven by stronger-than-expected performances in the gas transmission, LPG, and petchem segments. Profit after tax stood at Rs 28.4 billion, beating our estimate of Rs 24.2 billion (up 12 times YoY).
Management emphasised that improved realisation fueled a strong performance in the Liquid Hydrocarbon segment. Additionally, higher petrochemical sales, improved marketing margins, and reduced costs in the petrochemical segment contributed to an overall robust performance.
GAIL anticipates a robust domestic gas demand, projecting gas transmission volumes to reach 124 million metric standard cubic metre per day by end-FY24. Forecasts indicate a continued annual growth of 10-12% in volumes for FY25-26, with projected figures of 133 mmscmd for FY25 and 141 mmscmd for FY26 in the segment.
Management highlighted that the optimal cost for the petrochemical segment is $8-9/metric million British thermal unit, and the company currently procures and supplies at this rate to the PATA petrochemical plant. The segment's utilisation level is at 101%, and no shutdown is anticipated for the PATA plant in the near future.
We value the core business at 12 times December-25E adjusted earnings per share of Rs 14.1. Adding the value of listed and unlisted investments of Rs 31, we arrive at our target price of Rs 200. Reiterate 'Buy'.
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