MOSL: INDRAPRASTHA GAS (Buy)-Strong momentum continues-Key takeaways from our meeting with management

​INDRAPRASTHA GAS: Strong momentum continues; Key takeaways from our meeting with management

(IGL IN, Mkt Cap USD1.8b, CMP INR326, TP INR404, 24% Upside, Buy)

Strong growth continues

• CNG conversions continue at 3,000-3,500 per month, including 1,000-1,500 aggregators. There are ~20,000 aggregators yet to be converted to CNG. IGL targets to open 20 more CNG stations over the remainder of FY18.
  
• CNG volumes are expected to continue growing in double-digits. After already opening two CNG stations at Rewari, IGL intends to open additional four stations in FY18. It aims to attract more of highway traffic with these stations.
  
• IGL has identified six CNG stations on highways that do not come under the existing geographical areas (GAs) to capitalize on the highway CNG potential.
  

Rewari and Gurugram to add 0.5-0.6mmscmd each

• Rewari has large fuel oil-based industrial consumers, with peak sales of 0.5-0.6mmscmd.
  
• IGL was recently awarded part of Gurugram GA. It intends to open 10 CNG stations in a year. Peak sales are estimated at 0.5-0.6mmscmd, with sales ramping to 0.2-0.3mmscmd in 2-3 years.
  

Petcoke/FO ban could provide volumes thrust

• The recent petcoke/FO ban could drive some pick-up in industrial volumes. However, suppliers are now replacing FO with carbon black feedstock and other equally polluting but not banned industrial fuels.
  
• IGL has made representations to the Environmental Pollution and Control Authority (EPCA) for the effective implementation of a ban on polluting industrial fuel.
  
• Two big companies with total consumption of 15,000scmd in Ghaziabad and Greater Noida have already signed a contract for shifting to natural gas.