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BRICS Securities maintains SELL on Gail

BRICS Securities maintains SELL on Gail
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First Published: Tue, Mar 31 2009. 10 21 AM IST

Updated: Tue, Mar 31 2009. 10 21 AM IST
The petrochemical cycle downturn and lower oil prices are likely to pull down Gail’s earnings from FY09E levels for these two businesses. We expect EBITDA of petrochemicals to fall 67% and that of LPG/liquid hydrocarbon business to drop 51.4% in FY10E.
We expect EBITDA from natural gas transportation and trading to grow above 15% CAGR led by higher volumes from RIL’s KG basin gas and Petronet LNG’s expanded capacity. However, overall profits through FY11E will remain below FY09E levels.
GAIL currently trades at P/E of 10.4x FY09E and 14.8x FY10E EPS. The stock appears expensive in comparison to peer valuations, historical forward P/E, DCF and SOTP value.
Given the de-growth in estimated earnings and rich valuations, we recommend SELL on the stock.
Click here for a detailed report
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First Published: Tue, Mar 31 2009. 10 21 AM IST
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