GAIL’s revenue for the April to June 2023 quarter was largely in-line. However, the public sector gas distributor’s profit, margin and earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in lower than CNBC-TV18 poll projections, hurt by weak performance at its core natural gas marketing segment.
However, on a quarter-on-quarter basis, net profit more than doubled when compared with Rs 603.52 crore earning in the three months of January to March 2023.
This, GAIL said, was "mainly on account of increased gas marketing and transmission volumes and increased transmission tariff realisation." During April-June, GAIL transported 116.33 million standard cubic meters per day of gas, seven percent more than the preceding quarter. Gas marketing volume increased two percent to 98.84 mmscmd.
GAIL has petrochemical plants at Pata in Uttar Pradesh and Lepatkata in Assam which gives it a 17.5 per cent market share. The firm will convert an existing LPG Plant at Usar into 500,000 tonne per annum polypropylene complex.
Reflecting on the results, brokerage firm Nomura said though the results were weak, the optimistic outlook was already priced in.
The sharp rise in gas transmission tariffs and improved marketing performance was offset by petchem and LPG/LHC, it said. The brokerage also noted that a strong outlook for gas transmission was underpinned by uptick in tariffs and rising volumes.
Morgan Stanley, meanwhile, has an overweight stance on GAIL shares. It highlighted that strong gas transmission volume growth, improving petrochemicals, and positive guidance across all divisions point to upside risks to street estimates after nearly a year of challenges. As gas costs fall ahead by at least by a fifth and pipeline tariffs rise, upside remains, it added.
JPMorgan too has a neutral stance on the stock of the country’s largest gas distributor. The brokerage believes the recent STK rally was driven by a rally in Brent prices (+14 percent) and expectations that higher crude prices would benefit GAIL’s commodity businesses.
It, however, said that the transmission was weaker than estimated in the first quarter of the fiscal and petrochemicals saw another quarter of EBITDA loss.
It is also interesting to note that brokerage firm UBS gave state-run GAIL a double upgrade and nearly doubled its price target on the stock before the company's June quarter earnings announcement yesterday.
UBS double-upgraded GAIL to buy from Sell earlier and nearly doubled its price target to Rs 150, from Rs 80 earlier. This, it said, was on the back of a more stable transmission business now starting to contribute more towards its earnings, which was proof of the fact that the business is becoming more structural compared to cyclical earlier.
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