MOSL: INDRAPRASTHA GAS (Neutral) - EBITDA/scm normalizes; stronger crosswinds ahead
INDRAPRASTHA GAS: EBITDA/scm normalizes; stronger crosswinds ahead
(IGL IN, Mkt Cap USD4.8b, CMP INR512, TP INR480, 6% Downside, Neutral)
- IGL reported a mixed bag result, with lower than our estimate EBITDA/scm (at INR8) and higher than our estimate volumes (at 6.8mmscmd) – translating to in line EBITDA at INR4.9b (+31% YoY). CNG volumes rose 8% YoY, although down v/s pre-COVID levels of 4.92mmscmd (in 2Q-3QFY20).
- EBITDA/scm was lower than our estimate due to higher opex, despite the company taking a CNG price hike of INR0.7/kg in 4QFY21 to compensate for the increase in cost.
- During its 4QFY21 concall, ONGC stated that APM gas prices have bottomed out and would probably increase by 50-60% in the next revision (i.e. starting Oct’21) on its current base of USD1.79/mmbtu. It expects an upward revision in APM prices in Mar’22 as well. OMCs have also been in negotiation with CGDs to increase commissions to sell CNG at their ROs. We may see a hike in rentals for IGL soon.
- We have built in an EBITDA/scm of INR7/INR6.4 (unchanged) in FY22E/FY23E, taking into account the rise in rentals to OMCs as well as APM cost, which the company may not be able to pass on fully to consumers. To put things in perspective, a USD1/mmbtu change in gas prices results in INR4.2/kg increase in CNG gas cost (pre-tax).
- Petrol/diesel prices have crossed the mental threshold of INR100/liter for Indian consumers. The resolve of the CGDs to pass on increase in gas cost would be tested going forward owing to the aforementioned factors.
Indraprastha Gas Limited (IGL) is an India-based city gas distribution company. The Company's business consists of sale of natural gas. The Company is focused on industrial and commercial business. The Company supplies compressed natural gas (CNG) to the transport sector and piped natural gas (PNG) to the domestic, industrial and commercial sectors in Delhi and the National Capital Region (NCR). The Company offers PNG, which includes methane-CH4, as well as other hydrocarbons. The Company offers CNG, a gaseous fuel that includes a mixture of hydrocarbons, primarily methane. The Company has approximately 340 CNG stations spread all around the National Capital Territory of Delhi and in NCR. The Company provides PNG connections to over 6.36 lakhs domestic households, and approximately 2,630 commercial and industrial customers.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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