GAIL Rises Nearly 5% After Q2 Results; Motilal Oswal Says "Buy"

On Wednesday, shares of GAIL (India) Limited rose as much as 4.6 percent to Rs 94.40 after the company reported its financial results for the September-ended quarter. It was one of the top gainers on the Nifty 50 index for the day.

On Tuesday, the state-run natural gas processing and distribution company posted a net profit of Rs 1,068.16 crore for the second quarter of the financial year 2020-21, which is 8.5 percent lower than Rs 1,167.58 crore a year ago. Its profits were hit by a decline in revenue from marketing of natural gas that dropped to Rs 12,330.68 crore, from Rs 16,857.98 crore in the same quarter a year ago.

GAIL reported a pre-tax loss of Rs 334.55 crore on its natural gas marketing business as the pandemic impacted demand. The loss was however lower than Rs 614.06 crore pre-tax loss in April-June. The business had Rs 241.72 crore of pre-tax profit in July-September 2019.

The firm which owns most of the nation's cross-country gas pipeline network saw its pre-tax profit from the gas transportation business rise 27 percent to Rs 1,021.18 crore in the second quarter of the current fiscal year. With the resumption of economic activity bringing back demand, the petrochemical business clocked a pre-tax profit of Rs 176.31 crore as compared to a loss of Rs 82.32 crore in the year-ago period and Rs 154.43 crore in June 2020 quarter.

"The COVID-19 pandemic globally and in India has impacted business in general and caused a slowdown of economic activity," GAIL said. The firm said its physical performance has improved as compared to the previous (April-June) quarter and reached almost normal levels.

"The group has assessed the possible impact of COVID-19 in preparation of financial results based on the internal and external sources of information and expects no significant impact on the continuity of the business on a long term basis, the useful life of the assets and overall financial position of the group," it said.

The company also said that its board also approved to borrow a total of up to Rs 10,000 crore in one or more tranches from time to time, including the money already borrowed. Funds may be raised through rupee term loans, foreign currency term loan/bond, note, external commercial borrowing or issue of rupee-denominated debentures or bonds.

Motilal Oswal has given a "buy" rating to GAIL (India) Ltd's results with a target price of Rs 153.

"The stock is trading at 5.9x FY22E EPS of INR15.3 and 4.0x FY22E EV/EBITDA, with dividend yield of ~7% in FY20," the brokerage said.