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

​Indraprastha Gas: EBITDA below estimate; volume growth strong

(IGL IN, Mkt Cap USD2.1b, CMP INR1027, TP INR1067, 4% Upside, Neutral)

• IGL reported EBITDA of INR2.1b (+19% YoY, -17% QoQ), significantly lower than our estimate of INR2.5b, led by higher RM cost at INR5.5b (+5% YoY, +7% QoQ; our estimate was INR5b) and higher other expense at INR2.2b (+34% YoY, +48% QoQ; our estimate was INR1.4b). Higher lease provisioning contributed to higher other expenses. PBT at INR2.1b (+26% YoY, -7% QoQ) was in-line due to lower depreciation at INR244m (+37% YoY, -49% QoQ; our estimate was INR478m) and higher other income at INR209m (+219% YoY, +37% QoQ; our estimate was INR176m). Reported PAT was INR1.3b (+23% YoY, -12% QoQ; our estimate was INR1.5b) due to higher tax rate at 35.4% (we had estimated 32.5%).
  
• Strong CNG/PNG volumes: CNG volumes grew 16% YoY and 5% QoQ to 3.65mmscmd and PNG volumes grew 26% YoY and 5% QoQ to 1.19mmscmd. Total volumes grew 18% YoY and 5% QoQ to 4.84mmscmd.
  
• PAT for IGL's subsidiaries (CUGL and MNGL) was INR120m (IGL's share: ~50% at INR60m in 4QFY17).
  
• FY17 highlights: In FY17, sales volumes grew ~15% YoY (+13% YoY for CNG and +19% YoY for PNG) to 4.59mmscmd, with EBITDA/scm growing at ~16% YoY to INR5.9/scm. EBITDA increased by ~32% YoY to INR9.8b, with PAT growing ~37% YoY to INR5.7b. The management has recommended a final dividend of INR5/share in addition to interim dividend of INR3.5/share, a total dividend of INR8.5/share for FY17.