Reliance Money has recommended a reduce rating on GAIL India with a target price of Rs 230 in its April 6, 2009 research report.
“GAIL has indicated that the company is very bullish on the growth of natural gas market in India, and to capture the full benefit, GAIL is continuing the huge capex plan planned earlier. The company is in the process of expanding the gas pipeline network from 7000 km currently to 12500 km in next 3-4 years at a capex of around Rs 200 billion. Although we are bullish over the long term prospects of the company keeping in view the huge upside in transmission volumes, over the near term in next 1-2 years, we expect growth to remain muted mainly on account of poor performance of petrochemical and LPG business.”
“Going forward, from FY08-FY11, we expect earnings of the company to grow at a muted CAGR of 6.6% in spite of assuming 15.4% CAGR in gas transmission volumes from 85 mmscmd in FY08 to 130 mmscmd in FY11. In view of muted growth expected in next 2 years, we would me more comfortable in buying the stock at lower levels. Keeping in mind the decent gains posted by the stock in the recent market rally, we recommend Reduce on the stock with a target price of Rs 230,” says Reliance Money’s research report.
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