'Buy' ratings on GAIL shares as they gain in substance: Kotak

Jun 16 2014, 09:28 IST
Comments 0
SummaryGas major could see a jump in profits if transmission volumes increase

for the profitability of the LPG and petrochemical segments. However, we expect Gail’s subsidies to decline also as diesel prices will likely be deregulated in the near term, which will result in lower overall subsidies. It would be illogical to ask Gail to bear under-recoveries when it begins to pay the full price of gas for internal consumption in its LPG and petrochemical segments.

In our view, overall under-recoveries will decline sufficiently enough for the government and upstream companies (OIL and ONGC) to bear the entire amount of under-recoveries. The government can exempt downstream companies and Gail, which will result in Gail’s profits increasing sharply. We note Gail’s FY10-14 EPS has been lower by R10-17 due to the subsidy burden; the figure was R10 for FY14.

Kotak Institutional Equities

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...