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MOSL: INDRAPRASTHA GAS (Neutral)-EBITDA above estimate-volume growth strong

​Indraprastha Gas: EBITDA above estimate; volume growth strong

(IGL IN, Mkt Cap USD2.7b, CMP INR1216, TP INR1152, 4% Downside, Neutral)

• IGL reported EBITDA of INR2.8b (+8% YoY; +15% QoQ), ahead of our estimate of INR2.5b, led by lower gas cost. EBITDA/scm was INR6.2/scm v/s our estimate of INR5.6/scm (INR5.6/scm in 4QFY17 and INR6.5/scm in 1QFY17). PBT at INR2.5b (+13% YoY; +6% QoQ) was ahead of our estimate of INR2.3b; the differential at PBT level declined due to lower other income at INR179m (+68% YoY, -14% QoQ; our estimate was INR280m). Reported PAT was INR1.6b (+9% YoY, +20% QoQ; our estimate was INR1.5b) due to higher tax rate at 35.7% (35.4% in 4QFY17, 33.1% in 1QFY17; our estimate: 34%).
• Strong CNG/PNG volumes: CNG volumes grew 12% YoY and 1% QoQ to 3.71mmscmd and PNG volumes grew 17% YoY and 1% QoQ to 1.20mmscmd. Total volumes grew 13% YoY and 1% QoQ to 4.90mmscmd.
• PAT for IGL’s subsidiaries (CUGL and MNGL) was INR360m (IGL’s share: ~50% at INR180m in 1QFY18).

Valuation and view

• IGL had received permission from the Haryana government to lay a city gas distribution network in a part of Gurugram district. We believe more such permissions in other areas of Gurugram can boost the company’s prospects.
• Led by strong focus on curbing pollution in the National Capital Region, CNG sales volume is likely to grow strongly. Expected restriction on the usage of dirty fuel would propel volume further for the company. We model FY18/19 volume growth at 12%/11% and EBITDA/scm at INR6/scm.