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Dolat Capital Report
Superb performance by GAIL India Ltd. with positive surprise on the petrochemical and gas trading. Ebitda of Rs 38.2 billion (+1,363% YoY, +9% QoQ), much ahead of our as well as street estimates.
Ebitda growth led by-
Natural gas trading Ebitda margins $0.77/metric million British thermal unit near record high;
positive surprise on the petrochemical plant utilisation (more than 100%) and turned positive Ebitda after six quarters;
transmission tariff was much higher of Rs 66/mmbtu versus integrated tariff of Rs 58.6/mmbtu; and
NG transmission gas cost one of the lowest ($0.33/mmbtu), despite nil administered price mechanism gas allocations from December 2023.
Softer LNG price plus domestic gas production on the rise are the major volume growth drivers. Transmission to volume to clock 8% compound annual growth rate over FY23-FY26E. Guidance for the gas trading Ebitda range to Rs 40-45 billion for FY25E.
Considering elevated transmission tariffs and softer spot LNG to improve petrochemical profitability. Hence, we have tweaked our earnings by +25%/+17%/+18% in FY24E/FY25E/FY26E and maintain 'Accumulate' rating on the stock with upward revision in target price to Rs 205 (earlier 133).
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