Eye on Gail (India) as a growth stock

02-06-2014 • About Gail (India) ($GAIL) • By InTwits

Gail (India) is an attractive growth stock in Utilities:Non-Elec. industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Gail (India) showed fast growth in the last financial year. Gail (India)'s revenue surged on 21.1% in FY2014. In addition to revenue Gail (India) also keeps delivering EBITDA growth. It was 7.06% in FY2014

In the last 3 years Gail (India) showed fast revenue growth of 20.6% from FY2011 to FY2014 annually. EBITDA surged on 7.09% from FY2011 to FY2014 annually.

Gail (India) ($GAIL) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	256,772	351,067	440,578	508,927	616,435
Revenue growth, %		36.7%	25.5%	15.5%	21.1%
SG&A, %
EBITDA	54,658	65,070	70,665	74,642	79,912
EBITDA growth, %		19.0%	8.6%	5.6%	7.1%
EBITDA margin, %	21.3%	18.5%	16.0%	14.7%	13.0%
Net Income	33,278	40,210	44,436	43,736	47,862
Net Income margin, %	13.0%	11.5%	10.1%	8.59%	7.76%

CAPEX	59,581	72,458	98,482	89,904	52,697
CAPEX/Revenue, %	23.2%	20.6%	22.4%	17.7%	8.55%
Debt	54,132	69,041	115,056	164,723	185,369
Cash	45,486	25,844	14,462	30,646	32,111
Net Debt/EBITDA	0.2x	0.7x	1.4x	1.8x	1.9x

ROIC, %	17.3%	18.2%	16.5%	13.8%	12.1%
ROE, %	20.0%	20.6%	19.3%	16.3%	15.6%

Profitability and return on investment

EBITDA growth was partly attributed to margin expansion. If we look for the longer period Gail (India)'s EBITDA margin dropped on 5.50 pp from 18.5% in FY2011 to 13% in FY2014.

Gail (India) shows attractive ROIC at 12.1% for the last 12 months which assumes stable development model. Three years ago it was higher at 18.2%. For the last three years the average ROIC was 14.1%.

Net Income margin decreased on 0.800 pp from 8.60% to 7.80% in FY2014. In the longer period the company showed big decline in Net Income margin of 3.70 pp from 11.5% in FY2011 to 7.80% in FY2014.

Gail (India) operates at ROE of 15.6%. It's average ROE for the last three years was 17.1%.

Capital expenditures (CAPEX)

To fuel this fast growth the company had to invest in CAPEX.In FY2014 Gail (India) had CAPEX/Revenue of 8.55%. The company showed big decline in CAPEX/Revenue of 12.1 pp from 20.6% in FY2011 to 8.55% in FY2014. It's average level of CAPEX/Revenue for the last three years was 16.2%.

Leverage (Debt)

Gail (India) has medium debt level at 1.9x Net Debt/EBITDA to maintain high growth. In the longer period Gail (India) showed fast leverage growth of 1.25x from 0.66x in FY2011 to 1.92x in FY2014.

Peers in Utilities:Non-Elec.

Below you can find Gail (India) benchmarking vs. other companies in Utilities:Non-Elec. industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Va Tech Wabag ($WABAG)		-59.3%	16.2%	12.1%	38.3%

Median (1 company)		-59.3%	16.2%	12.1%	38.3%
Gail (India) ($GAIL)		36.7%	25.5%	15.5%	21.1%

Top companies by EBITDA margin, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Va Tech Wabag ($WABAG)	3.8%	9.7%	9.1%	9.6%	9.4%

Median (1 company)	3.8%	9.7%	9.1%	9.6%	9.4%
Gail (India) ($GAIL)	21.3%	18.5%	16.0%	14.7%	13.0%

Top companies by CAPEX/Revenue, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Va Tech Wabag ($WABAG)	0.5%	1.6%	1.6%	2.6%	4.6%

Median (1 company)	0.5%	1.6%	1.6%	2.6%	4.6%
Gail (India) ($GAIL)	23.2%	20.6%	22.4%	17.7%	8.5%

Top companies by ROIC, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Va Tech Wabag ($WABAG)	24.0%	21.2%	17.9%	18.2%	21.1%

Median (1 company)	24.0%	21.2%	17.9%	18.2%	21.1%
Gail (India) ($GAIL)	17.3%	18.2%	16.5%	13.8%	12.1%

Top companies by Net Debt / EBITDA

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Va Tech Wabag ($WABAG)	-1.5x	-2.1x	-1.6x	-1.3x	-0.5x

Median (1 company)	-1.5x	-2.1x	-1.6x	-1.3x	-0.5x
Gail (India) ($GAIL)	0.2x	0.7x	1.4x	1.8x	1.9x

Gail (India) stock price chart

Gail (India) financials

mln.	FY2010	FY2011	FY2012

Revenue	256,772	351,067	440,578
EBITDA	54,658	65,070	70,665
Net income	33,278	40,210	44,436
CAPEX	59,581	72,458	98,482
Debt	54,132	69,041	115,056
Cash	45,486	25,844	14,462

About Gail (India)

GAIL (India) Limited operates as a natural gas company in India and internationally. The company operates through Transmission Services, Natural Gas Trading, Petrochemicals, Liquefied Petroleum Gas (LPG) and Other Liquid Hydrocarbons, and Other segments. It is involved in the transmission, distribution, and marketing of natural gas to power and fertilizer sectors, as well as supplies liquefied natural gas to downstream consumers. The company also markets LPG, propane, pentane, naphtha, MFO, propylene, and hydrogenated C4 mix; and manufactures and markets petrochemicals, such as high-density polyethylene and linear low-density polyethylene under the G-Lex and G-Lene brand names. In addition, it operates approximately 400 compressed natural gas retail outlets; and provides piped natural gas to domestic, commercial, and industrial applications, as well as has participating interests in 20 exploration blocks in Mahanadi, Mumbai, Cambay, Assam-Arakan, Tripura Fold Belt, Gujarat Kutch, Krishna Godavari, Cauvery, and Cauvery Palar basins. Further, the company offers long term lease of dark fiber and duct, tower space and collocation facilities, and point-to-point leased line bandwidth services through its 13,000 km OFC network; and generates electric power through a joint venture. It owns approximately 10,900 km of natural gas pipelines; 2 LPG pipelines covering 2,040 km; 7 gas processing plants for production of LPG and other liquid hydrocarbons; and a gas based integrated petrochemical plant for producing polymer. The company was founded in 1984 and is based in New Delhi, India.