Gail (India) reports 80.2% Net Income growth in 2017 while 6.6% Revenue decline

22-05-2017 • About Gail (India) ($GAIL) • By InTwits

Gail (India) reported FY2017 financial results today. Overall the company's long term financial model is characterised by the following facts:

Gail (India) has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.6%. At the same time it's a lot of higher than industry average of 2.4%.
CAPEX is quite volatile: ₹20,417m in FY2017, ₹14,605m in FY2016, ₹28,898m in FY2015, ₹52,697m in FY2014, ₹89,904m in FY2013
The company has business model with average profitability: ROIC is 10.3%
It operates with high leverage: Net Debt/EBITDA is 0.4x while industry average is 0.3x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue decreased on 6.6%. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.9 pp from 8.5% to 13.4% in FY2017. During FY2013-FY2017 EBITDA Margin bottomed in FY2016 at 8.5%.

Net Income margin increased on 3.3 pp from 3.6% to 7.0% in FY2017. During FY2013-FY2017 Net Income margin bottomed in FY2016 at 3.6%.

Investments (CAPEX, working capital and M&A)

In FY2017 Gail (India) had CAPEX/Revenue of 4.2%. Gail (India) showed decline in CAPEX/Revenue of 4.3 pp from 8.5% in FY2014 to 4.2% in FY2017. It's average level of CAPEX/Revenue for the last three years was 3.9%. During FY2013-FY2017 CAPEX as a % of Revenue bottomed in FY2016 at 2.8%.

Return on investment

The company operates at low ROIC (10.3%) and ROE (8.9%). ROIC increased on 4.7 pp from 5.5% to 10.3% in FY2017. ROE increased on 3.6 pp from 5.3% to 8.9% in FY2017. During the last 5 years ROIC bottomed in FY2016 at 5.5%. During the last 5 years ROE bottomed in FY2016 at 5.3%.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.4x and Debt / EBITDA is 0.6x. Net Debt / EBITDA dropped on 0.7x from 1.1x to 0.4x in FY2017. Debt dropped on 41.5% while cash dropped on 23.0%. During FY2013-FY2017 Net Debt/EBITDA topped in FY2015 at 3.0x and was declining since that time.

Gail (India) has no short term refinancing risk: cash is higher than short term debt (194.9%).

Financial and operational results

FY ended 31-03-2017

Gail (India) ($GAIL) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	508,927	616,435	605,147	518,553	484,546	-6.6%
EBITDA	74,642	79,912	56,239	44,223	65,008	47.0%
Net Income	43,736	47,862	31,601	18,692	33,682	80.2%
Balance Sheet
Cash	30,646	32,111	15,583	18,457	14,210	-23.0%
Short Term Debt	33,040	24,761	35,390	8,117	7,292	-10.2%
Long Term Debt	131,684	160,609	147,524	58,649	31,798	-45.8%
Cash flow
Capex	89,904	52,697	28,898	14,605	20,417	39.8%
Ratios
Revenue growth	15.5%	21.1%	-1.8%	-14.3%	-6.6%
EBITDA growth	5.6%	7.1%	-29.6%	-21.4%	47.0%

EBITDA Margin	14.7%	13.0%	9.3%	8.5%	13.4%	4.9%
Net Income Margin	8.6%	7.8%	5.2%	3.6%	7.0%	3.3%
CAPEX, % of revenue	17.7%	8.5%	4.8%	2.8%	4.2%	1.4%

ROIC	13.8%	12.1%	7.3%	5.5%	10.3%	4.7%
ROE	16.3%	15.6%	9.5%	5.3%	8.9%	3.6%
Net Debt/EBITDA	1.8x	1.9x	3.0x	1.1x	0.4x	-0.7x

Peers in Utilities:Non-Elec.

Below we provide Gail (India) benchmarking against other companies in Utilities:Non-Elec. industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
A2Z Maintenance & Engineering Services ($A2ZMES)	-32.6%	-22.6%	-15.4%	127.7%	-
Va Tech Wabag ($WABAG)	12.1%	38.3%	8.8%	4.7%	-
Median (2 companies)	-10.2%	7.8%	-3.3%	66.2%	-
Gail (India) ($GAIL)	-	21.1%	-1.8%	-14.3%	-6.6%

Top companies by Gross margin, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Va Tech Wabag ($WABAG)	-	24.6%	21.0%	20.0%	-
Median (1 company)	-	24.6%	21.0%	20.0%	-

Top companies by EBITDA margin, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Va Tech Wabag ($WABAG)	9.6%	9.4%	8.6%	8.7%	-
Median (1 company)	4.1%	-1.4%	-3.3%	8.7%	-
Gail (India) ($GAIL)	14.7%	13.0%	9.3%	8.5%	13.4%

Top companies by CAPEX/Revenue, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Va Tech Wabag ($WABAG)	2.6%	4.6%	1.2%	0.6%	-
Median (1 company)	12.2%	8.0%	1.2%	0.6%	-
Gail (India) ($GAIL)	17.7%	8.5%	4.8%	2.8%	4.2%

Top companies by ROIC, %


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Va Tech Wabag ($WABAG)	18.2%	21.1%	18.5%	15.8%	-
A2Z Maintenance & Engineering Services ($A2ZMES)	-2.3%	-5.2%	-6.5%	-	-
Median (2 companies)	8.0%	8.0%	6.0%	15.8%	-
Gail (India) ($GAIL)	13.8%	12.1%	7.3%	5.5%	10.3%

Top companies by Net Debt / EBITDA


Top	FY2013	FY2014	FY2015	FY2016	FY2017
Va Tech Wabag ($WABAG)	-1.3x	-0.5x	-0.6x	0.1x	-
Median (1 company)	-1.3x	-0.5x	-0.6x	0.1x	-
Gail (India) ($GAIL)	1.8x	1.9x	3.0x	1.1x	0.4x

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.