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Friday, June 25, 2010

Large Cap Stock Analysis - GAIL

Checkout why stock investment in GAIL should be an easy investing decision to make for any conservative and defensive investor.

GAIL India would definitely bare a "buy stocks" status with one year target stock price to Rs.541.

This is primarily due to higher than expected regulated transmission tariffs, a boost in gas trading margins and resilient petrochemicals business. It has always been considered as a defensive stock to buy as its business is exposed to the domestic market in India.

Company’s low debt levels and strong cash flows help it to embark on aggressive capex plans without stretching its balance sheet. Revenue estimates for FY11 and FY12 are expected to go up by 49% and 67% respectively due to the pass through of doubling of APM (administered price mechanism) gas prices traded by GAIL.

Operating profit of the company in FY12 is expected to jump by 45% due to a 43% increase in gas transmission margin estimates. Profit margin from petrochemical business may also get a boost due to capacity expansion and higher pricing.

Market Cap 61235.75
* EPS (TTM) 24.75
* P/E 19.51
* P/C 16.54
* Book Value 141.19
* Price/Book 3.42
Div(%) 70.00%
* Div Yield(%) 1.45
Market Lot 1.00
Face Value 10.00
Industry P/E 15.42

Currently, the stocks trades at 18.1 P/E of FY11 earnings and at 14.3 P/E of FY 12 expected earnings. The valuation looks attractive with reasonable upside in one year time frame.

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