IDFC Securities - Indraprastha Gas (532514) Indraprastha Gas Q3FY18 results (Outperformer) - Volume growth remains well ahead of peers

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IDFC Securities

Indraprastha Gas' Q3FY18 results (Outperformer) - Volume growth remains well ahead of peers

Q3FY18 result highlights

Indraprastha Gas (IGL) reported PAT of Rs1.66bn, up 15% yoy, (IDFCe Rs1.74bn), with higher volume growth of 14% yoy to 5.3 mmscmd (IDFCe 5.1 mmscmd) offset by weaker gross margins of Rs10.6/scm (+5% qoq, IDFCe 11.3/scm). Higher sales to commercial/industrial segment fulfilled by more expensive LNG have driven the miss on margins.
Resultant EBITDA/scm of Rs5.4/scm declined 7% yoy even as absolute EBITDA of Rs2.6bn (IDFCe Rs2.88bn) rose 6% yoy.
CNG/PNG volume growth at 11/21% yoy to 257 mn kg/126 mmscm. CNG growth in mmscm terms higher at 12% due to higher conversion factor of 1.39 vs 1.38 in Q3FY17.
Share of profit from MNGL/CUGL at Rs170mn -6 yoy, translating to Rs0.2/share (we assume Rs1.1/sh for FY18E from these two associates).
9MFY17 EBITDA/PAT of Rs8.2/5bn has grown 9.4/13.5% respectively, supported by a 13.7% yoy growth in volumes and a 6.8% growth in gross margins/scm even as EBITDA/scm declined 3.8% yoy due to higher other opex.

Key positives: Strong volumes.

Key negatives: Lower margins due to higher gas costs/ higher opex.

Impact on financials: FY18/19/20E EPS reduced 2.3/2.8/3% to factor lower margins. TP reduced to Rs341.

Valuation & View

IGL has sustained the peer leading volume growth into the qtr/9M even as margins dipped in Q3. CNG volume growth of 11/12% yoy in kgs/scm in Q3 is much higher than the average growth seen over FY14-17 and well above peer growth rates. Muted domestic gas prices, coupled with moderate 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 FY18-19E would sustain at >10%. Additionally the stellar performance of the associate companies CUGL/MNGL (FY17 PAT 35% higher vs FY16) also drives higher consolidated earnings over the period. Driven by these factors, we expect IGL’s consol EPS CAGR @ 9% in FY18-20E on a strong base of FY11-16 growth of ~11%. Our revised TP of Rs341/share implies ~17% upside from CMP. Reiterate Outperformer.

08/02/2018 6 EN

Underlying

Indraprastha Gas

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INE203G01019 India

Provider

IDFC Securities

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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Indraprastha Gas' Q3FY18 results (Outperformer) - Volume growth remains well ahead of peers

MOSL: INDRAPRASTHA GAS (Buy)-EBITDA below estimate-strong volume growth continues

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Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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