Showing posts from January 25, 2009
The stock currently trades at Rs 199, implying a multiple of 6.5 times our estimated FY11 earnings. Given the company's virtual monopoly in the domestic gas transmission segment and strong growth prospects, the valuation multiples have to be in line with the best valued companies in the sector. However, government interference in transmission tariffs and the company's diversification into more volatile commodity businesses like petrochemicals, compel us to assign multiples that are at a slight discount to some of its industry peers. Thus, we believe the ideal P/E band for the company to be in the region of 9 to 14. We have given a multiple of 9. Taking into consideration its earnings, our estimates suggest that GAIL should ideally trade at Rs 277 from an FY11 perspective. This translates into a CAGR of 16% and hence the 'BUY' recommendation on the stock. Alternatively put, the upside from the current levels is 39% point-to-point.
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Aarati Krishnan India Inc is finding it increasingly difficult even to grow its profits, after effortlessly clocking scorching growth numbers over the last few years. That's the trend emerging from the first 550 companies that have declared their numbers for the October-December 2008 quarter. Net profits of these companies for the December quarter actually shrank by 2.4 per cent, after growing by 17.6 per cent in the same quarter last year. More than half of the companies that unveiled their numbers reported profit declines and roughly a fourth made net losses. While sales continued to expand by 20 per cent in the December quarter, still-high raw material costs and interest charges were the key villains of the piece.Interest costs, the villain Sales numbers from the 550 companies provided little evidence that demand for products or services is skidding to a stop. Sales growth improved to 20.2 per cent this quarter from 15.5 per cent the same period last year. Raw materia…