Earnings Outlook
GAIL may report a weak Dec qtr on flat transmission volume
This story was originally published at 21:57 IST on 28 January 2025
Register to read our real-time news.Informist, Tuesday, Jan. 28, 2025
By Anand JC
MUMBAI - The growth rate in GAIL (India) Ltd.'s operating profit in the December quarter was likely dampened by sequentially flat transmission volumes and a moderation in its gas trading margin, according to analysts.
GAIL, India's largest state-owned natural gas processing and distribution company, is projected to report a net profit of INR 23.98 billion in the December quarter, translating to a 15.7% on-year and a 10.3% sequential fall, according to an average of 15 analyst estimates.
The 'Maharatna' company's revenue from operations is projected to decline 3% on-year to INR 332.07 billion, according to the average of estimates. Among the brokerages, Systematix Shares and Stocks (India) has projected the highest revenue at INR 382.29 billion revenue and Yes Securities (India) the lowest at INR 289.22 billion.
The volume of GAIL's natural gas marketing business, which contributes around 75% to its revenue, was 96.60 million standard cubic metres per day in the September quarter and 98.14 mscmd in the December quarter last year.
GAIL sources a significant quantity of gas from the US, the prices of which are linked to Henry Hub. Higher Henry Hub prices during the December quarter coupled with lower spread over Brent Crude is likely to hurt GAIL's earnings, Systematix said in a report. This is also expected to be a drag on the company's operating profit.
GAIL's earnings before interest, taxes, depreciation, and amortisation is projected at INR 35.61 billion, according to the average of 13 analyst estimates. The company's operating profit is expected to slip 4.5% on year and 2.6% sequentially. The estimates on the operating profit vary widely from INR 32.43 billion by YES Securities to INR 42.28 billion by Nuvama Wealth Management.
As per a Dolat Capital Market report, India's gas consumption remained unchanged on a sequential basis in the December quarter. The natural gas transmission volume was 130.63 mscmd in the September quarter and 121.54 mscmd in Oct-Dec last year.
Analysts at Prabhudas Lilladher expect GAIL's transmission volumes to fall to around 129 mscmd, while YES Securities has pegged it at 128.2 mscmd for the December quarter. Dolat Capital Market and Kotak Institutional Equities have projected transmission volumes of 131 mscmd for the quarter.
JM Financial Institutional Securities expects GAIL's December quarter EBITDA to decline due to moderation in margins on the gas trading and petrochemical businesses. Kotak Institutional Equities expects GAIL's marketing business and petrochemical business, which was impacted by higher raw material costs, to be weaker. However, GAIL's liquefied petroleum gas and liquid hydrocarbons business may report strong growth on a sequential basis in the December quarter, Kotak Institutional Equities said in a note.
Kotak Institutional Equities expects GAIL's LPG sales volumes to be 13% higher on-year and 11% higher sequentially. Analysts expect higher realisations sequentially for GAIL's LPG and liquid hydrocarbons business.
The company will disclose its December quarter earnings on Jan. 30. Analysts will keep a keen eye on potential gas price-related tariff hikes, apart from the company's updates on the progress of ongoing pipeline projects.
On Tuesday, the company's shares closed 0.9% lower on the National Stock Exchange at INR 166.13. Shares of the company have depreciated roughly 17% since GAIL reported its September quarter earnings on Nov. 5.
Following are the Oct-Dec earnings estimates for GAIL (India) based on reports compiled by Informist from 15 brokerages in descending order by the estimate of net profit:
| Brokerage | Net sales (in INR mln) | Net profit (in INR mln) | EBITDA (in INR mln) |
| Nuvama Wealth Management Ltd | 3,37,344 | 28,287 | 42,281 |
| Nirmal Bang Equities Pvt Ltd | 3,22,115 | 25,712 | 35,345 |
| Motilal Oswal Financial Services Ltd | 3,26,342 | 25,234 | 38,009 |
| Sharekhan Ltd | 3,26,340 | 25,230 | --- |
| Kotak Institutional Equities | 3,35,926 | 24,821 | 34,869 |
| Systematix Shares and Stocks (India) Ltd | 3,82,292 | 24,399 | 32,851 |
| ICICI Securities Ltd | 3,38,600 | 23,900 | 39,700 |
| Elara Securities (India) Pvt Ltd | 3,33,254 | 23,857 | 35,816 |
| Nomura Equity Research | 3,37,200 | 23,800 | 35,100 |
| JM Financial Institutional Securities Pvt Ltd | 3,29,878 | 23,695 | 35,128 |
| Emkay Global Financial Services Ltd | 3,65,589 | 23,557 | 32,729 |
| Dolat Capital Market Pvt Ltd | 3,11,500 | 23,300 | 34,500 |
| YES Securities (India) Ltd | 2,89,223 | 22,609 | 32,433 |
| Prabhudas Lilladher Pvt Ltd | 3,27,100 | 21,700 | 34,200 |
| Anand Rathi Share and Stock Brokers Ltd | 3,18,408 | 19,524 | --- |
| Average | 3,32,074.1 | 23,975 | 35,612.4 |
End
Edited by Saji George Titus
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