Indraprastha Gas' Q4FY18 results (Outperformer) - Another strong quarter
Q4FY18 result highlights
- Indraprastha Gas (IGL) reported PAT of Rs1.75bn, up 30% yoy, (IDFCe Rs1.7bn), with strong volume growth of 11% yoy to 5.4 mmscmd (IDFCe 5.3 mmscmd) and adjusted gross margins of Rs11.2/scm (+10% yoy, IDFCe 10.9/scm).
- IGL earnings supported by Rs160mn of provision reversal of OMC trade margins. Reported gross margins of Rs11.5/scm jumped 13% yoy
- Resultant EBITDA/scm of Rs5.7/scm jumped 17% yoy even as absolute EBITDA of Rs2.9bn (IDFCe Rs2.7bn) rose 37% yoy.
- CNG/PNG volume growth at 10/16% yoy to 256 mn kg/124 mmscm..
- Share of profit from MNGL/CUGL at Rs160mn -6 yoy, translating to Rs0.2/share. FY18 contribution of the two companies at Rs1/sh to IGL.
- FY18 EBITDA/PAT of Rs11.1/6.7bn has grown 17/16% respectively, supported by a 12.9% yoy growth in volumes and a 7% growth in gross margins/scm
Key positives: Strong volumes and margin growth.
Key negatives: Opex/ scm has grown sharply yoy.
Impact on financials: No change in EPS estimates, TP reduced marginally to factor marginally lower consol EPS.
Valuation & View
IGL has sustained the peer leading volume growth into FY18 with margin strength as well. CNG volume growth of 10% yoy in Q4FY18 is much higher than the average growth seen over FY14-17 and above peer growth rates. 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 stellar performance of the associate companies CUGL/MNGL (FY17 PAT 16% higher vs FY16) also drives higher consolidated earnings over the period. Driven by these factors, we expect IGL’s consol EPS CAGR @ 15% in FY18-20E on a strong base of FY12-17 growth of ~15%. Our revised TP of Rs355/share implies ~35% 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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