GAIL - Gas pipeline expansion to fuel growth, initiate with Buy
We initiate coverage on GAIL with Buy and target price of `585 on 14% EPS CAGR over FY11-13e due to doubling of natural gas pipeline capacity. We expect the low subsidy-sharing burden to continue. Key stock triggers are commissioning of gas transmission pipeline and ramp up in gas supply. Further, potential upside to our target price is likely from higher crude price, freedom from subsidy, E&P exploration portfolio and CGD business. n Gas pipeline expansion is on track and would lead to net profit CAGR of 14% over FY11-13e. GAIL plans capex of +US$6bn over FY11-13e; of this, two-thirds would be used for gas transmission pipeline expansion, which would enhance EBITDA share of the segment to 63% in FY13e, providing stability and earnings visibility. n Expect lower subsidy sharing. With government asking lower subsidy payout since the past two quarters, we expect GAIL's subsidy share to remain low (~6.5% of upstream share). n Potential upsides to our target price. i) If GAIL's subsidy burden becomes nil, our price target would go up by `125; ii) Boost of `30/share for every US$5/bbl increase in crude; iii) Another `30/share from E&P exploration portfolio, iv) CGD business. n Valuation. Our target price is based on DCF value of the present businesses, market value of listed investments and BV for other investments. Downside risks: lower gas transmission tariffs/volumes; lower petchem margins/volumes; subsidy overhang. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
--
For Anything related with Stock market be Online at
http://www.niftyviews.com/
Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234
FOR TRIAL STOCK/NIFTY/OPTION CALLS
You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group.
To post to this group, send an email to STOCKRESEARCHER@googlegroups.com
To unsubscribe email
Stockresearcher-unsubscribe@googlegroups.com
for more info visit
http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB
.
This is Not a Spam Mail.
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture."
Posts
0 comments:
Post a Comment