GAIL India Q4 Results Review - One-offs And APM Gas Deallocation Drag Earnings: ICICI Securities

GAIL India (GAIL) has delivered a muted Q4FY23, with adjusted EBITDA of Rs4.9bn (-87% YoY, I-Sec est Rs14bn) and recurring PAT of Rs7.4bn (-72% YoY, ISec est Rs8.2bn). Reported EBITDA/PAT of Rs3.1bn/6bn was impacted by writeoffs related to the potential re-routing of the KMBPL (Rs1.1bn) and legal settlement of an old case (Rs70mn). Also, the deallocation of APM gas, which was being used for System Use Gas (SUG) by another ~0.5mmscmd in Q4 (Q3 saw 0.45mmscmd being withdrawn), had a material ~Rs4bn impact on transmission segment earnings. Petchem earnings were also lower due to high costs.

Therefore, FY23 has been a weak year with ~50% YoY dip in standalone EBITDA/47% YoY dip in standalone PAT. Despite the gloom, we remain optimistic. FY24E is likely to see multiple drivers of outperformance: i) The new entity, which has taken over the Gazprom contract, is already supplying the contracted gas, ii) moderate spot LNG prices mean deallocation impact is no longer a factor, iii) stronger demand, completion of Easter Grid and higher domestic supply imply a 10% demand uptick and iv) costs for both petchem and LPG will also be lower. Reiterate BUY with target price of RS124.

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