Gail has indicated that it has already placed ~90% of the US LNG volumes for CY20 as well through adequately priced or hedged contracts
Chirag Batavia • 7 April 2020
GAIL India Ltd
Gail has indicated that it has already placed ~90% of the US LNG volumes for CY20 as well through adequately priced or hedged contracts. The company has managed the risk well over the past seven quarters post commencement of the US LNG suppplies despite volatility in crude/spot LNG prices.
KIE's bear-case scenario for the US LNG portfolio indicates that the gas marketing segment may break-even for a year or two, until fertilizer plants ramp up off-take.
KIE’s reverse valuation exercise suggests that GAIL is pricing in a scenario of significant gas marketing losses of over Rs20 bn in perpetuity, ignoring near-term nature of risk and GAIL’s ability to manage it.
KIE has ascribed lower EV/EBITDA multiple of 5-6x for GAIL's gas transmission & commodity segments and assumed 30% holding company discount to MTM value of investments to arrive at an implied negative value of Rs. 122 bn for gas marketing segment - at a reasonable 6x EV/EBITDA multiple, it builds in a large EBITDA loss of ~Rs. 20 bn in perpetuity.
KIE has cut EPS estimates to Rs.11.5 (-6%) in FY20, Rs.9.8 (-29%) in FY21 and Rs.11.4 (-23%) in FY22. KIE finds the concerns overdone and reiterates BUY on GAIL with a FV of Rs. 150. We see GAIL as the top pick among energy PSUs given its structural growth prospects and play on oil price recovery.
KIE gives a Buy call on Gail India Ltd on 07/04/2020
CMP: Rs.81
Fair Value: Rs.150
Potential Upside: 85.18%
Market Cap: Rs.364.19 bn
Time Frame: 12 months
Note: The above is brief note on the company, based on the inputs of KIE research report dated 3rd April 2020 which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.
Disclaimer: http://bit.ly/2n5AxIE
Looking to trade GAIL India Ltd and other Indian stock? Open your trading account with Lakshit Financial
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please refer the Risk Disclosure Document issued by SEBI and go through the Rights and Obligations and Do's and Dont's issued by Stock Exchanges and Depositories before trading on the Stock Exchanges
Eureka Forbes Ltd (EUREKAFORB) EFL ticked most of the boxes in FY25: (1) product growth acceleration to high teens, (2) margin expansion and (3) healthy FCF generation. EFL expects the product business to continue in its mid-to-high teens growth trajectory in FY26, notwithstanding the challenging market conditions. Company will maintain its thrust on innovation to further reduce the total cost of ownership in water purifiers so as to accelerate penetration and improve its premium mix. On the service front, management expects growth to accelerate in the next 3-4 quarters. Management shared that the EBITDA margin will keep expanding year after year, even as it further ramps up A&P spends. Our fair value is based DCF (discounted cash flow) methodology. Note: This is a synopsis of the Research report issued by Kotak Securities Limited. This is not a comprehensive report and before taking any investment decision we request you to refer the detailed report including disclaimers by clicking here: https://www.kotaksecurities.com/stock-research-recommendations/. Further, the recipient of this material should take their own professional advice before investing. Disclaimer: https://www.kotaksecurities.com/disclaimer/research/
Home First Finance (HOMEFIRST) Home First remains consistent on operational and financial parameters. Home First (HFFC) reported 24% earnings growth, with 19% net interest income growth in Q2FY25. Gross stage-3 ratio was flat qoq at 1.7%, stage-2 ratio declined 6 bps qoq to 1.1%. While other asset classes have reported mixed trends residential home loans, as an asset class, continues to stand tall. Home First, with 85% home loan exposure, is well-placed on the above. We expect the company to deliver 25% earnings CAGR for FY25-27E. We remain assertive with a BUY rating and FV of Rs1,360 (no change). Note: The above is a brief note on the company, based on the inputs of KIEresearch report dated 25111Oct, 2024, which is available onour website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamenta1. Disclaimer: http://bit.ly/2n5Ax1E https://www.kotaksecurities.oom/ksweb/research/kotak-research-reports/top-weekly-picks
