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Citigroup: price target on GAIL India is Rs. 482 7 December 2007
In research report Citigroup says: “Government is likely to appoint GAIL as nominee for the entire PMT gas from April 2008. At present, HBJ carries 5mmscmd of PMT gas whereas 4.8mmscmd is marketed directly by the JV partners i.e. ONGC, BG and RIL. In addition, Tapti production has recently gone up by 5.5mmscmd, which will also be covered by the likely decision. We have a Buy/Low Risk rating as GAIL provides a unique investment opportunity as a dominant gas pipeline owner and transporter in India. Increasing gas supplies and the reduced potential for falling pipeline charges remain the key positives." The report also says, "GAIL is also building 5 new pipelines and upgrading 3 existing pipelines in order to gear up for the imminent increase in gas supplies from the East Coast. Assured ROE on pipeline investments reduces risks and provides visibility for value creation from the additional investments of Rs 180 billion over next 4-5 years. Our target price for GAIL of Rs 482 is based on a) Existing Business Value of Rs 303 based on EV/EBITDA of 6.5x FY08E, b) the value of investments/E&P assets (Rs137 per share) and c) value accretion from new pipelines at Rs 36 per share.” A month ago GAIL (India) has drawn up a growth strategy which shall steer it to revenues of Rs 500 billion plus by 2011 from Rs 160.47 billion in the year 2006-07. GAIL is moving ahead in a time bound manner to complete the 8 new gas pipelines in two phases, targeting 100% completion by 2011. These will form part of an integrated gas grid in the country. The new pipelines are expected to increase GAIL`s natural gas transmission capacity to around 300 MMSCMD and almost double GAIL`s existing trunk pipeline network to nearly 12,000 Km, the company said. Current share price of GAIL India on the BSE: Rs. 470.95 P/E ratio is 19.91 |
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