BNP Paribas puts reduce rating on GAIL
BNP Paribas initiates research coverage on Gail, India’s largest gas transmission utility, with a ‘reduce’ rating and a target price of Rs 176 per share.
By ET Bureau |
GAIL
RESEARCH: BNP PARIBAS
RATING: REDUCE
CMP: Rs 212
BNP Paribas initiates research coverage on Gail, India���s largest gas transmission utility, with a ���reduce��� rating and a target price of Rs 176 per share.
The low estimates factor in a steep decline in profitability of Gail���s petrochemicals, LPG and liquid hydrocarbons segments in the wake of a cyclical downturn. These business segments together accounted for 51.8% of Gail���s FY08 EBITDA.
Gas transmission tariffs are likely to fall on new regulation. The Petroleum and Natural Gas Regulatory Board (PNGRB) proposes to use the depreciated asset value of Gail���s existing pipelines to determine tariffs .
Starting FY10, BNP Paribas will model tariffs of Gail���s existing pipelines as per PNGRB���s proposals. BNP Paribas uses a sum-of-the-parts approach to arrive at target price of Rs 176 per share.
It values the petrochemicals and LPG/LHC business segments at 10-year trough EV/EBITDA multiple of 2.6x, Gail���s unlisted investments at book value, and its investments in listed securities at 30% discount to current market prices.
RESEARCH: BNP PARIBAS
RATING: REDUCE
CMP: Rs 212
BNP Paribas initiates research coverage on Gail, India���s largest gas transmission utility, with a ���reduce��� rating and a target price of Rs 176 per share.
The low estimates factor in a steep decline in profitability of Gail���s petrochemicals, LPG and liquid hydrocarbons segments in the wake of a cyclical downturn. These business segments together accounted for 51.8% of Gail���s FY08 EBITDA.
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Gas transmission tariffs are likely to fall on new regulation. The Petroleum and Natural Gas Regulatory Board (PNGRB) proposes to use the depreciated asset value of Gail���s existing pipelines to determine tariffs .
Starting FY10, BNP Paribas will model tariffs of Gail���s existing pipelines as per PNGRB���s proposals. BNP Paribas uses a sum-of-the-parts approach to arrive at target price of Rs 176 per share.
It values the petrochemicals and LPG/LHC business segments at 10-year trough EV/EBITDA multiple of 2.6x, Gail���s unlisted investments at book value, and its investments in listed securities at 30% discount to current market prices.
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