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Indraprastha Gas: Robust all round growth
May 25, 2010

Indraprastha gas has announced its FY10 results. The company has reported a 27% YoY and 25% YoY decline in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline grows by 27% YoY during FY10 led by 19% YoY growth in overall volumes.
  • EBITDA margin increases marginally to 35.7% during FY10, up from 35.5% in FY09 due to lower raw material cost (as a percentage of sales).
  • Other income declines by 30% YoY.
  • Bottomline registers a growth of 25% YoY during FY10.
  • Board recommends a dividend of Rs 4.5 per share.


Financial snapshot
(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 2,285 2,898 26.8% 8,571 10,838 26.5%
Expenditure 1,557 1,954 25.4% 5,527 6,973 26.2%
Operating profit (EBDITA) 727 944 29.8% 3,044 3,865 27.0%
EBDITA margin (%) 31.8% 32.6%   35.5% 35.7%  
Other income 54 25 -53.7% 219 154 -29.6%
Depreciation 176 198 12.6% 674 775 14.9%
Profit before tax 605 771 27.4% 2,589 3,244 25.3%
Tax 202 256 26.8% 864 1,089 26.1%
Profit after tax/(loss) 403 515 27.7% 1,725 2,155 24.9%
Net profit margin (%) 17.6% 17.8%   20.1% 19.9%  
No. of shares (m)         140  
Diluted earnings per share (Rs)         15  
Price to earnings ratio (x)         14.4  

What has driven performance in FY10?
  • Indraprastha gas reported a 26.5% YoY growth in topline during FY10 on the back of a 19% YoY growth in overall volumes. CNG volumes grew by 14% YoY, while PNG volumes grew by 61% YoY during the year. During 4QFY10, the company posted a growth of 26.8% YoY in total operating income.

    Volumes
    Particulars FY09 FY10 Change
    CNG (m kgs) 460 523 13.5%
    PNG (m scm) 54 87 60.8%
    Overall (m scm) 660 782 18.6%

  • IGLís margins improved during 4QFY10 primarily on the back of raw material costs, which declined by 2.9% (as a percentage of sales). Other expenditure increased by 1.7% as a percentage of sales during the quarter.

  • The company plans to increase CNG prices in the national capital region by about 20%.This move comes on the back of the government's decision to hike the price of administered price mechanism (APM) gas produced by ONGC and OIL from US$ 1.8 per m British thermal units (mBtu) to US$ 4.2 per mBtu. That is in line with prices of Reliance Industries' KG basin gas. IGL's current supply mix is 2.2 m standard cubic meters per day (mmscmd) of APM gas, 0.3 mmscmd of KG basin gas, and 0.4 mmscmd of regassified LNG. Since a bulk of IGL's gas supplies is sourced from APM gas, it had to choose between passing the cost to the customer and absorbing it.

  • The board of directors of Indraprastha gas has recommended a dividend of Rs 4.5 per share.

What to expect?
At the current price of Rs 221, the stock is trading at a multiple of 14 times our FY12 estimated earnings. We are positive on the city gas distribution story over the long-term and believe that IGL has a strong momentum going for it in the national capital region, given its early mover advantage and a strong track record. However, it is facing some problems in the input price of natural gas.

The company has well-entrenched operations, strong margins, return ratios and is debt free. However, current valuations no longer allow the excellent margin of safety an investor could obtain in the recent past.

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Feb 22, 2018 03:37 PM

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