GAIL's profit was driven by a sales-volume jump and rise in polyethylene prices in its petchem business, strong gas-trading margin and rise in LPG cracks. Natural gas (NG) transmission earnings were hit by a one-off, while lower share of subsidy suggests that GAIL is sharing only cooking-fuel subsidy. Till what time will PSUs compensate the public for high crude price?
n Stellar petchem performance. Despite sharing subsidy of `9bn in 4Q, GAIL reported higher-than-expected PAT of `7.8bn due to: i) stronger petchem margin and volumes; ii) rise in gas-trading margin due to increase in spot-cargo imports; iii) strengthening LPG cracks. Petchem sales volume was up 78% qoq to144,000 tons on a draw down in inventory. Petchem margin was up 26% qoq to `30,326/ton, as international polyethylene prices were up 7% qoq while GAIL's feedstock is fixed-cost in nature.
n NG transmission earnings lower owing to a one off. NG transmission earnings were lower on a `1.16bn write-off related to retrospective downward adjustment of tariffs since Nov '08, for the Dahej-Hazira-Uran pipeline (DUPL). Volume was flat qoq, at 120mcmd.
n Subsidy sharing remains an overhang. GAIL shared only 7% of upstream subsidy burden in FY11 (9.2% in FY10), suggesting it is sharing only cooking-fuel subsidy. This is a positive, but the ad hoc nature of the subsidy sharing mechanism is still an overhang.
n Key stock triggers: ramp-up in gas supply; commissioning of a gas transmission pipeline.
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.
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