Company Report | Q4FY11 Result Update

LONG TERM INVESTMENT CALL

26 May 2011 BUY

Industry Oil & Gas Gail (India) Ltd (Gail) EBITDA and PAT were below Unicon’s estimates
CMP (INR) 442 on account of higher subsidy burden due to an increase in crude prices
Target (INR) 540 during the quarter. Subsidy payout during Q4FY11 was 9 bn against 3.4
Upside / Downside (%) 22 bn in corresponding quarter previous year.
52 week High/Low (INR) 538/410
560,794 Revenue for the Q4FY11 increased 36% YoY to INR 88.9 bn while
Market Cap (INR Mn)
increased 30% YoY to INR 324.6 bn on an annual basis. The strong
3M Avg. Volumes 1,156,238
revenue growth during the quarter was on the back of good business
P/E (FY12e) 13.5
from the Natural Gas transmission, Gas trading and Petrochemicals.
Shareholding Pattern (%)
Natural Gas transmission volumes grew 5% YoY to 120.43 mmscmd, gas
trading volumes increased 3% YoY to 85.73 mmscmd, while
petrochemicals volumes increased 32% YoY to 144,000 MT in during the
quarter. For FY11, gas transmission, gas trading, LPG transmission and
petrochemicals has shown YoY volume growths of 10%, 2%, 6% and 2%
respectively. LPG and OLHC (Other liquid hydro carbons) volumes
remained muted at 3% and 12% YoY respectively.

EBITDA for the quarter Q4FY11 decreased 5.6% to INR 12.87 bn

compared to INR 13.6 bn in Q4FY10, due to the higher subsidy payout
Stock Performance during the quarter. For FY11 EBITDA increased 15.8% YoY to INR 55.3bn.

Net profit decreased 14% during the quarter while it was up 13.4% for the
year on an annual basis. The PAT margin decreased by 492 bps during
the quarter while it was down 150 bps during the year.

Annual Highlights

Gail has made capex of INR 52 bn during FY11 with a plan to further
invest INR 286 bn during FY12, FY13 & FY14 out of which 39% will be in
pipeline, 75 in E&P 29% in petro and remaining 25% in others. The
company will incur capital expenditure of INR 76.9 bn in FY12 to add
Performance (%) 1,800 km pipeline.
1 Month 3 Months 1 Year
GAIL -8.4 1.1 -1.3 Outlook & Valuation
NIFTY -7.8 2.1 10.1
At the CMP of INR 441 Gail is trading at a PE(x) of 13.2x and 12.1x and
(INR Mn) EV/EBITDA(x) of 9.2x and 8.5x for FY12 and FY13 respectively. We have
Particulars Actual Estimates reduced our target price after factoring in potentially higher subsidy
Total Income 88,936 82,680 burden going forward. However considering the expansion plan of the
EBIDTA 12,877 14,650 company and the huge demand for gas, there is strong visibility of higher
volumes going forward. Delays in gas production at Reliance Industries’
Reported PAT 7,831 9,560
KG D6 Basin remains a concern. We maintain BUY rating on Gail, with a
* Source: Bloomberg, Unicon Research
reduced target price of INR 540.

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@unicon.in
Standalone Financials (INR Mn)
DESCRIPTION Q4FY11 Q4FY10 YoY FY11 FY10 YoY
Net Sales 88,936 65,221 36.4% 324,586 249,964 29.9%
Other operating income 153 469 -67.3% 779 1,069 -27.1%
Total Operating Income 89,089 65,690 35.6% 325,365 251,033 29.6%
Total Expenditure 76,212 52,054 46.4% 270,041 203,272 32.8%
Operating Profit 12,877 13,637 -5.6% 55,324 47,760 15.8%
EBITDA (%) 14.5% 20.8% -630bps 17.0% 19.0% -202bps
Depreciation 1,672 1,389 20.4% 6,503 5,618 15.7%
EBIT 11,205 12,248 -8.5% 48,822 42,142 15.8%
Other Income 525 1,017 -48.4% 4,407 4,343 1.5%
Interest 341 200 70.6% 829 700 18.4%
EBT 11,389 13,065 -12.8% 52,400 45,785 14.4%
Tax 3,558 3,956 -10.1% 16,789 14,386 16.7%
Profit After Tax 7,831 9,108 -14.0% 35,611 31,398 13.4%
Net Profit (%) 9% 14% -492bps 11% 12% -150bps
EPS 6.2 7.2 -14.1% 28.1 24.8 13.4%
Source: Company, Unicon Research

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@unicon.in
 Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@unicon.in