Analysts' corner

GAIL & Cummins India

GAIL
Reco price/date: Rs 332/May 14 ;
Current/target price: Rs 339.70/NA
Oil and gas regulator PNGRB has slashed KG D6 pipeline tariff of GAIL by 80 per cent to Rs 5.56/mmbtu with retrospective effect from November 2008. The pipeline has a rated capacity of 16mmscmd and the volumes carried in FY12 and FY13 were 14.7mmscmd and 7.3mmscmd, respectively. The revision in tariff is due to lower depreciation charged by GAIL on this pipeline which PNGRB has disapproved. The contribution from KG D6 pipeline to GAIL's total volumes is not significant given GAIL's average run-rate of 115-120mmscmd. Moreover, declining gas production from KG D6 basin is likely to have lower impact on its prospective tariff for FY2014 and FY2015. Analysts await management targets on the financial impact of the tariff-cut. Maintain Neutral.

-Angel broking

CUMMINS INDIA
Reco price/date: Rs 527/May 13;
Current/target price: Rs 502/Rs 585
Cummins India's Q4FY13 topline was above estimates at Rs 1,130 crore (up 10 per cent), though Ebitda margins disappointed at 16.8 per cent (down 200 basis points) due to incremental cross-service charges of Rs 15.7 crore in the quarter. Adjusted PAT was in line at Rs 155 crore (up 7.7 per cent YoY) with full-year profits of Rs 690 crore. Management has guided for 10 per cent revenue growth in FY14 and expects margins to remain at Q4FY13 levels through the year. Analysts' estimates already factor in margin moderation in FY14. Maintain Buy.

-Religare Capital Markets