Stocks

GAIL India shares jump as Q4 results surprise marketmen

Chennai | Updated on June 25, 2020 Published on June 25, 2020

However, most analysts do not expect more gains

Shares of GAIL (India) jumped over 5 per cent in early trade after the company’s numbers surprised street expectations positively. However, the stock failed to sustain the gains, as the market turned volatile. Analysts expect only moderate gains from the current level. The stock, which zoomed to a high of ₹106.9 in early trade, finally settled at ₹103.15, up 1.8 per cent, on the BSE.

The company has reported a 169 per cent year-on-year growth in standalone profit for the quarter ended March 2020, mainly on the back of tax write-back and strong operating performance. Net profit increased to ₹3,018.2 crore, against ₹1,122.23 crore it had posted in the the same period last year. However, revenue fell 5.4 per cent to ₹17,755.01 crore (₹18,763.87 crore).

HDFC Securities has maintained the ‘Add’ recommendation on GAIL with a target price of ₹110. The recommendation is based on 9 per cent CAGR expansion in gas transmission volumes over FY21-23E to 113 mmscmd on the back of better pipeline connectivity, revamp of fertiliser plants, and benign gas prices.

ICICI Securities, which also retained the ‘Add’ rating, said: “Given concerns of trading loss on US LNG, and gas transmission and petrochemicals being hit by the lockout, we have cut our FY21E EPS by 26 per cent and target price by 15 per cent to ₹113.”

While tariff reforms may bring gains, gas marketing may be worse hit than estimated, I-Sec said.

‘Underperformance’

Credit Suisse has retained its ‘underperformance’ rating with a price target of ₹74. Though the results surprised Credit Suisse positively on higher margin for LPG and petchem, the foreign investment advisory firm believes Q4 margins are not sustainable.

The impact on EBITDA was primarily due to weak performances from the natural gas trading, petchem and LPG businesses during the year, said Motilal Oswal Financial Services. GAIL Q4 result is a massive beat on EBITDA as gas trading, LPG businesses fare better, Motilal Oswal, which maintains its ‘buy’ rating on GAIL, said.

The company has not declared any final dividend for FY20. However, it declared an interim dividend of ₹6.4/share in FY20.

According to Morgan Stanley, GAIL has reported strong performance amid a weakening macro environment, which led to a good beat on most parameters. Morgan Stanley, which retains its ‘overweight’ rating on GAIL with a target price of ₹153, said GAIL’s operations are at near pre-Covid-19 levels.

Published on June 25, 2020
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.