Dalal Street Hot Chips Buy Calls – GAIL India
GAIL (INDIA)
BSE Code: 532155
Volume: 76000
CMP: Rs 448.70
The company has got major expansion projects under implementation which are likely to double its gas transmission capacity to around 300 MMSCMD and petro- chemical capacity to 0.9 MMTPA by FY14. These projects will work as a big positive for the company because of the highly favourable demand- supply scenario. To supplement this, the company is also backed by a strong balance- sheet with a net debt to equity of 0.08 and is well-positioned to support these projects. Reallocation in the oil and gas sector driven by global risk and aversion would also benefit GAIL and provide a protective shield when the rising crude prices will impact the others. The Kirit Parekh Committee has recommended zero subsidy burden for GAIL as unrelated to crude unlikely to be implemented, but obviously a huge `blue sky’ bonus. The company can be looked at for some gains in the medium term.
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