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Gail India Q1FY23 Review- Gas trading segment continues to drives profitability

ICICI Securities 05 Aug 2022

What's buzzing:

Gail India reported Q1FY23 results that were better than estimates mainly on account of gas trading segment.

Context:

Revenue increased 116.1% YoY to Rs 37562.5 crore amid higher realisation. EBITDA at Rs 4365.7 crore (up 81.1% YoY) was higher than estimate of Rs 3009.2 crore. Reported PAT was at Rs 2915.2 crore, up 90.5% YoY (our estimate: Rs 2017.1 crore). On the gas trading front, volumes were at 100.8 mmscmd (up 5.1% YoY, 6.5% QoQ). Gas trading EBIT of Rs 2314.5 crore was well ahead of our estimated EBIT Rs 990.8 crore amid better marketing spread.

Perspective:

Gas transmission volumes increased 1.7% YoY (1.8% QoQ) to 109.5 mmscmd against our estimate of 111 mmscmd. Gas transmission EBIT was at Rs 800.5 crore against our estimates of Rs 903.7 crore due to higher than expected costs. Petrochemical segment reported EBIT of Rs 35.2 crore, lower than our estimate of Rs 241.4 crore mainly due to higher costs and lower volume due to plant shutdown during the quarter. The LPG/LLH segment EBIT was above estimates at Rs 634.9 crore (our estimate: Rs 532.9 crore), mainly due to higher realisation and lower than expected costs. Overall, results were driven by higher realisation and better marketing spread owing to elevated spot LNG prices. Profitability from gas trading and LPG/LLH segment was better than expected while profits from gas transmission and petchem segment were lower than expected. Gas transmission and trading volumes during Q1FY23 improved YoY. In the current quarter (Q2FY23E-TD), spot LNG prices are trading at higher level. However, transmission and trading volume was impacted owing to supply disruption. The company has reduced its internal consumption and petchem segment is currently operating at lower capacity utilisation. Transmission/trading volumes and global LNG price trend will be key monitorables in the near term.

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