MOSL: INDRAPRASTHA GAS (Neutral)-In-line results-strong volume growth continues

​Indraprastha Gas: In-line results; strong volume growth continues

(IGL IN, Mkt Cap USD3.3b, CMP INR310, TP INR301, 1% Upside, Neutral)

• IGL reported EBITDA of INR2.8b (+9% YoY, +2% QoQ; in-line). EBITDA/scm stood at INR5.9 v/s our estimate of INR6 (INR6.1 in 2QFY17, INR6.2 in 1QFY18). PBT increased 20% YoY (+4% QoQ) to INR2.6b (in-line). Adj. PAT stood at INR1.7b (+9% YoY, +5% QoQ; in-line); the differential at PAT level increased due to a higher tax rate of 35.3% (est. of 34%; 35.7% in 1QFY18, 33.8% in 2QFY17).
  
• Strong CNG/PNG volume growth continues: CNG volumes grew 13% YoY (+6% QoQ) to 3.91mmscmd, while PNG volumes grew 18% YoY (+9% QoQ) to 1.30mmscmd. Total volumes grew 14% YoY (+6% QoQ) to 5.22mmscmd.
  
• PAT for IGL's subsidiaries (CUGL and MNGL) stood at INR410m (IGL's share: ~50% at INR210m in 2QFY18).
  

Valuation view

• IGL has received permission from the Haryana government to lay a city gas distribution network in a part of the Gurugram district. We believe more such permissions in other areas of Gurugram can boost IGL's prospects.
  
• Led by a strong focus on curbing pollution in the National Capital Region, CNG sales volume is likely to grow strongly. The expected restriction on the usage of dirty fuel would propel volume further for the company. We model FY19/20 volume growth at 10%/12% and EBITDA/scm at INR6.