Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Gas sector - New winners and losers likely on policy changes in gas sector - ICICI Securities

Posted On: 2020-09-27 23:39:39


Completion of Indian gas grid, jump in LNG import capacity, rise in domestic gas output, rapid CGD expansion and court orders to replace polluting fuels with gas are set to boost India's gas consumption. Our top pick GSPL (BUY) is a play on strong gas volume growth, and GGL (ADD), our preferred pick in CGD, on switch to gas from polluting fuels. Disruption in CGD from competition and deregulation of gas price is likely to hurt volumes and margins of investor favourites IGL (SELL) and MGL (HOLD) and lead to derating. Deregulation in an improving global gas price environment may help re-rate ONGC (BUY). GAIL (HOLD) may gain from strong volume growth and tariff reforms in transmission. Outlook for gas marketing, experiencing pain in FY21, is set to improve but long-term challenges remain. PLNG (HOLD), another investor favourite, may be hit by domestic gas output rise and LNG import overcapacity in Gujarat from CY23.

- Competition & gas deregulation risks for CGD & NGT order to ban polluting fuels an opportunity; GGL top pick: CGD may be hit by competition and gas price deregulation; OMCs are likely to emerge as formidable competitors for IGL and MGL. MGL is the most vulnerable to margin fall given its lofty margins (Rs9.75/scm vs Rs4.73-6.45/scm for peers in FY20) and IGL to derating given its lofty valuation (24x FY22 vs 12.1-18.5x for peers). Potential positive in CGD is NGT order of Jul'20 requiring ban on furnace oil and petcoke as fuel. GGL is best placed to gain from any switch to gas from polluting fuels given its presence in areas where industrial volumes dominate. GGL's volume recovery from lockdown is also quicker than peers. We upgrade GGL to ADD from HOLD (no change in EPS and target price). We reiterate SELL on IGL. We have cut MGL's EPS by 8-7% and target price by 9% but upgraded it to HOLD given modest valuation after steep correction.

- ONGC to gain if gas deregulated in improving global gas price environment: ONGC's gas price is set to fall to US$2/mmbtu from Oct'20 under the prevailing formula. However, press reports indicate JKM spot LNG price may be set as the floor for its gas price. This may mean ONGC's FY22E gas price may be US$3.6-4.2/mmbtu depending on discount to JKM price and imply 20-37% upside to our EPS estimate. Low LNG liquefaction capacity addition means JKM spot futures for FY22-FY26E are at US$5.2-5.8/mmbtu vs US$4.7-4.1/mmbtu in FY20-FY21E.

- Outlook good for gas transmission; GAIL's gas marketing outlook better in FY22-FY24E: Gas volume growth outlook for GAIL and GSPL is good. Tariff reforms and unified tariff may bring gains for GAIL. GAIL's gas marketing EBITDA loss is estimated at Rs5.1bn in FY21E but positive EBITDA of Rs2.9-12.4bn in FY22-24E at Henry Hub and Brent futures; EBITDA would be higher at Rs9-25.7bn at Brent of US$50-60/bbl. We have cut GAIL's FY21-FY22E EPS by 29-7% on gas marketing cut and target price by 13% to Rs88/share but retain our HOLD rating.

- Rise in domestic gas output and LNG import overcapacity in Gujarat may hurt PLNG's volumes and margins: Dahej volumes may be hit by rise in domestic gas output of 45-50mmscmd in the next 3-4 years and LNG overcapacity in Gujarat as 10mmtpa capacity is added in CY22. Dahej margins are also likely to be lower on new volumes that replace RasGas contract that expires in CY28. There is also risk of further Kochi regas charge cut. Factoring volume and margin concerns has led to cut in PLNG's FY21-22E EPS by 5-1% and target price by 13% to Rs225.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Burger King India - IPO Review - ICICI Direct

Quant Pick - LIC Housing Finance - ICICI Direct

Tech Mahindra - Analyst Meet Update - ICICI Direct

Gladiator Stocks - Crompton Greaves Consumer Electricals - ICICI Direct

Derivatives Monthly Outlook - Nifty support at 12800 for ongoing momentum...

Quant Pick - Sun Pharmaceuticals - ICICI Direct

Monetary Policy - Expectation from YES Securities

Sector Update on Asset Management Companies - Subdued but improvement expected - HDFC Securities

Pre Monetary Policy View - Dec, 2020 - Lakshmi Iyer, President and CIO (Debt) & Head Products, Kotak Mutual Fund

Maintain REDUCE on Siemens - Smart recovery priced in - HDFC Securities

Banking Sector Credit Trends - Growth continues to moderate - HDFC Securities

Q2 FY21 GDP: Light at the end of the tunnel - YES Securities

Siemens - Q4 FY20 Result Update - YES Securities

Super action in Home Loans - SBIN, ICICIBC, AXSB, HDFC and LICHF gaining share - YES Securities

Polymer price tracker - Dec 1, 2020 - PVC prices continue to tread higher - ICICI Securities

Bajaj Finance - Company Update - Dec 2020 - ICICI Direct

Siemens Ltd - Healthy revival in orders and margins - ICICI Securities

Covid Recovery Pulse - Nov 30, 2020 - Festive positivity continues in auto retails, e-way bill generation improves...

Derivatives Weekly View (November 27): Momentum expected to continue in broader markets with Nifty support at 12800...

Derivatives Strategy - Positional Option - ICICI Direct

Preview on RBI Monetary Policy - December 2020 - Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

10 things you should know about Burger King India Limited

Views of HDFC Securities and Acuité Ratings & Research on Q2FY21 GDP Numbers

Rollover Report for November 2020 - December 2020: Angel Broking

Initiating Coverage on Godrej Properties - The housing factory - HDFC Securities

Burger King IPO - Angel Broking

Rollover Analysis - Record foreign inflows pushes Nifty to 13k - YES Securities

Ceramic tiles industry - Market share gains sustain for top branded players - ICICI Securities

Gas sector - CGD: Competition to hit margins, volumes and lead to derating - ICICI Securities

Cement - Prices resilient in Q3; consensus upgrades to continue - ICICI Securities

Specialty chemicals - Price trend in Sep-20 - ICICI Securities

Timken India - Q2FY21 Company Update - ICICI Direct

Upgrade in target price of IDFC First Bank - Angel Broking

Laurus Labs stake acquisition in Richore Lifesciences - Angel Broking

Shares of Lakshmi Vilas Bank (LVB) suspended from trading - Angel Broking

Initiating Coverage on Sundram Fasteners - Fastening growth - HDFC Securities

Astral Poly Technik - Scalability to further improve with storage tanks foray - ICICI Securities

Vardhman Special Steel - Q2FY21 Company Update - ICICI Direct

Initiating Coverage - Advanced Enzyme Technologies - ICICI Direct

L&T - Secures Large Contract - Nov 25, 2020 - Angel Broking

Alembic Pharmaceuticals - Tentative Approval for JV - Angel Broking

Drug launch by Lupin - Tacrolimus Capsules - Angel Broking

Gujarat Gas - Nov 25, 2020 - Angel Broking

Metropolis Healthcare - Nov 25, 2020 - Angel Broking

NTPC - Showcase of strength & competitiveness - ICICI Securities

Telecom - Market Share TRACKER - Bharti is narrowing the gap on incremental market share vs RJio - ICICI Securities

Cochin Shipyard - Q2FY21 Result Update - ICICI Direct

Engineers India - Q2FY21 Result Update - ICICI Direct

Rupee - Nov 24, 2020 - Reliance Securities

FMCG Sector Update - Recovery unlocked; lower growth divergence - HDFC Securities



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019