Indraprastha Gas' Q2FY19 results (Outperformer) - Steady quarter
Q2FY19 result highlights
- Indraprastha Gas (IGL) recurring PAT of Rs1.87bn, up 11% yoy, (IDFCe Rs1.9bn), with strong volume growth of 13% yoy to 5.9 mmscmd (IDFCe 5.8 mmscmd).
- Higher LNG, costs, weaker rupee drove Gross margins and EBITDA/scm to Rs10.7/5.7 per scm, down 4/3% qoq.
- Absolute EBITDA of Rs3.1bn (+9% yoy) was broadly in line with estimates of Rs3.05bn.
- CNG/PNG volume growth at 13/13% yoy to 290 mn kg/136 mmscm. Within PNG, while domestic segment grew 4%, commercial volumes grew materially by 49% yoy aided by the ban on usage of other liquid fuels in and around NCR
- Share of profit from MNGL/CUGL at Rs235mn +12% yoy, translating to Rs0.3/share. FY18 contribution of the two companies was at Rs1/sh to IGL.
Key positives: Strong volumes growth, resilient margins.
Key negatives: Higher tax rate. Other opex grew 7% yoy
Impact on financials: We leave our FY19/20E EPS unchanged. TP remains at Rs345/sh.
Valuation & View
IGL has sustained strong volume growth into H1FY19, with stellar CNG growth and stronger commercial volumes starting to reflect in the numbers. CNG volume growth of 13% yoy in Q2FY19 is much higher than the average growth seen over FY14-17. Moderate domestic gas prices, coupled with soft LNG prices and the renewed regulatory thrust to commercial volumes (via the recent SC order banning usage of petcoke/FO in the NCR) implies that despite the higher base, volume growth over FY19-20E would sustain at >10%. Additionally the price hike taken to pass on both rupee impact and higher domestic gas prices, coupled with the stellar performance of the associate companies CUGL/MNGL also drives higher consolidated earnings over the period. Driven by these factors, we expect IGL’s consol EPS CAGR @14% in FY18-20E on a strong base of FY12-17 growth of ~15%. Our TP of Rs345/share implies ~21% upside from CMP. Reiterate Outperformer
Indraprastha Gas Limited (IGL) is an India-based city gas distribution company. The Company's business consists of sale of natural gas. The Company is focused on industrial and commercial business. The Company supplies compressed natural gas (CNG) to the transport sector and piped natural gas (PNG) to the domestic, industrial and commercial sectors in Delhi and the National Capital Region (NCR). The Company offers PNG, which includes methane-CH4, as well as other hydrocarbons. The Company offers CNG, a gaseous fuel that includes a mixture of hydrocarbons, primarily methane. The Company has approximately 340 CNG stations spread all around the National Capital Territory of Delhi and in NCR. The Company provides PNG connections to over 6.36 lakhs domestic households, and approximately 2,630 commercial and industrial customers.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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