GAIL (India) up 7% post December quarter results; analysts maintain 'buy'

The company said rise in profit is mainly due to better physical performance, better margins in gas marketing and liquid hydrocarbons.

Shares of GAIL (India) surged 7 per cent to Rs 130 on the BSE on Tuesday after most of the brokerage firms maintained ‘buy’ rating on the stock following earnings improvement in the December quarter (Q3FY20).

The company’s profit before tax (PBT) witnessed quarter on quarter (QoQ) growth of 22 per cent at Rs 1,872 crore in Q3FY20. Net profit, meanwhile, jumped 18 per cent to Rs 1,251 crore from Rs 1,064 crore reported in Q2FY20. The company said rise in profit is mainly due to better physical performance, better margins in the gas marketing and liquid hydrocarbons (LHC) segment.

The company said its turnover in the quarter was maintained at Rs 17,735 crore, as against Rs 18,010 crore in Q2FY20 with volume growth mainly in gas transmission, gas trading, liquefied petroleum gas (LPG) transmission, and LHC businesses neutralizing, the drag in prices of petrochemicals and natural gas.

The management said GAIL is in step with the government’s vision of expanding the share of natural gas to 15 per cent in the energy basket of India. Meanwhile, the board has declared an interim dividend at 64 per cent for the financial year FY 2019-20 i.e. Rs 6.40 per equity share.

Analysts at KRChoksey Shares and Securities remain positive on the fundamental growth of the stock due to its strengthening earnings visibility across most segments over FY20-21.

“We expect volumes from both transmission and trading to pick up from increasing pipeline connectivity along with commencement of fertilizers plants on the Jagdishpur-Haldia-Bokaro-Dhamra pipeline (JHBD) pipeline. However, revision in tariffs by Petroleum and Natural Gas Regulatory Board (PNGRB) for pipelines including Hazira - Vijaypur -Jagdishpur (HVJ) could dent margins to an extent. Earnings from LPG/LHC are likely improving from recovery in the LPG prices,” the brokerage firm said in result update.

“We remain constructive on GAIL as the risk/reward is favorable. India will derive higher benefit from the low LNG prices as the domestic natural gas ecosystem (CGD network, RLNG terminals, pipelines, revamp of fertiliser plants) develops. New US liquefaction terminals will boost RLNG exports and also keep Henry Hub (HH) prices subdued, enabling GAIL to swap cargoes. Thus, US LNG is not a concern,” analysts at HDFC Securities said.

At 01:56 pm, the stock was trading 6 per cent higher at Rs 129 on the BSE, as against a 0.90 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 23.3 million shares changing hands on the NSE and BSE till the time o writing of this report.