HDFC Securities opinion of muted performance for GAIL (India) is based on 9% CAGR expansion in gas transmission volume over FY21-23E to 124mmscmd on the back of increase in domestic gas production, increase in demand of RLNG, and (3) completion of major pipelines in eastern and southern India.

Q1FY22 EBITDA was 9% below our estimate and APAT was 14% below, owing to higher-than-expected raw material cost, operating expenses, and lower-than- expected other income, offset by lower-than-expected finance cost.

NG transmission: Q1 revenue came at INR 15bn (+17% YoY, -3.1% QoQ). Transmission volumes came in at 108mmscmd (+19% YoY, -2% QoQ) and tariff at INR 1,516/tscm (+13% YoY and -2% QoQ). The operating profit came in at INR 12bn (+23% YoY and -2% QoQ).

Petchem: Q1 revenue was reported at INR 14bn (+12% YoY, -39% QoQ), with sales volume at 138kT, (-25% YoY, -41% QoQ). The overall revenue was up YoY with improvement in realisation, offset by lower volumes due to the planned shutdown in Q1. Realisation remains healthy at INR 99/kg (+48% YoY, +4% QoQ). The operating profit of the segment was at INR 3bn on account of improved price realisation, offset by lower physical performance as planned shutdown resulted in utilisation at 60%.

Con call takeaways: (1) The company has planned a capex of INR ~400bn for the next five years. (2) The management has guided for 10-12mmscmd increase in gas transmission volume by FY22-end. (3) The company has fully tied up trading volumes for FY22 and FY23.