Gail India posted a record high net profit in the quarter to December 2012, thanks to a low subsidy burden and with the petrochemicals division posting a robust growth after a recent expansion. The stock hasn’t performed well in the past one year, as investors continue to be worried over the steadily declining volumes of natural gas as well as the ad hoc nature of subsidies.
In the quarter to December 2012, Gail’s 18% jump in net profit took it to a record level of . 1,285 crore. LPG and liquid hydrocarbons was the biggest contributor to the profit jump as LPG subsidy was restricted to . 700 crore, of which it took credit for . 85.7 crore excess provisions for the previous quarter. The segment’s profit jumped 94% to . 592 crore.
The petrochemical segment also performed well with revenues growing 26% to . 1,107 crore and profits rising 13.4% to . 439.5 crore. The company’s main business of natural gas transmission is hurting because of steadily declining volumes. The negative impact was partially mitigated by higher tariffs from new pipelines. Another problem is the ad hoc nature of subsidies, which means inspite of relatively lower subsidies till date, the March 2013 quarter subsidies could be substantially higher.
At just 11% above its 52-week low, the stock is trading at a price-to-earnings ratio of 10.9, which is reasonable considering the company’s scale of operations and historical valuations. However, the dwindling gas availability and subsidies will continue to dominate investor sentiments, going ahead.
KEY POINTS In the quarter to December 2012, Gail’s 18% jump in net profit took it to a record level of . 1,285 crore
Co’s main business of natural gas transmission is hurting because of steadily declining volumes
Gail stock is now trading at a PE ratio of 10.9, which is reasonable considering co’s scale of operations and historical valuations
In the quarter to December 2012, Gail’s 18% jump in net profit took it to a record level of . 1,285 crore. LPG and liquid hydrocarbons was the biggest contributor to the profit jump as LPG subsidy was restricted to . 700 crore, of which it took credit for . 85.7 crore excess provisions for the previous quarter. The segment’s profit jumped 94% to . 592 crore.
The petrochemical segment also performed well with revenues growing 26% to . 1,107 crore and profits rising 13.4% to . 439.5 crore. The company’s main business of natural gas transmission is hurting because of steadily declining volumes. The negative impact was partially mitigated by higher tariffs from new pipelines. Another problem is the ad hoc nature of subsidies, which means inspite of relatively lower subsidies till date, the March 2013 quarter subsidies could be substantially higher.
At just 11% above its 52-week low, the stock is trading at a price-to-earnings ratio of 10.9, which is reasonable considering the company’s scale of operations and historical valuations. However, the dwindling gas availability and subsidies will continue to dominate investor sentiments, going ahead.
KEY POINTS In the quarter to December 2012, Gail’s 18% jump in net profit took it to a record level of . 1,285 crore
Co’s main business of natural gas transmission is hurting because of steadily declining volumes
Gail stock is now trading at a PE ratio of 10.9, which is reasonable considering co’s scale of operations and historical valuations
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