X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
IGL: A lackluster quarter - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

IGL: A lackluster quarter
Jun 9, 2015

Indraprastha Gas Ltd (IGL) has announced its results for the quarter and the year ended March 2015. The company has reported 5.3% year on year (YoY) decline in the revenues while net profit for the quarter grew by 6.0% YoY. Here is our analysis of the results.

Performance summary
  • The revenues for the quarter declined by 5.3% YoY. For FY15, the topline witnessed a decline of 6.1% YoY.
  • The operating profit for the quarter declined by 8.5% YoY, with operating profit margins at 19.3% , as compared to 19.9% in 4QFY14. For FY15, the operating profit grew by 1.4% YoY, with operating profit margin at 21.6%, higher than 20.0% in FY14.
  • The net profits for the quarter grew by 6.0% YoY with net profit margins at 10.5%, up from 9.4% in the corresponding quarter last year. For FY15, the bottomline grew by 21.5%, while net profit margin expanded to 11.9% from 9.2% in FY14.
  • During the quarter, the company has acquired 47.5 million shares (consisting of 50% of present paid share capital) of Maharashtra Natural Gas Ltd (MNGL) in the first tranche at a price of Rs 38 per share from certain financial investor shareholders of MNGL.
  • The Board of Directors has recommended a dividend of Rs 6 per share (dividend yield 1.5%) for approval of members in ensuing Annual General Meeting. At current stock price, this translates into a dividend yield of 1.6%.

Financial performance snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Sales 9,644 9,129 -5.3% 39,090 36,699 -6.1%
Other operating income 16 39 147.1% 48 111 130.9%
Total income 9,660 9,168 -5.1% 39,138 36,810 -5.9%
Expenditure 7,738 7,410 -4.2% 31,314 28,880 -7.8%
Operating profit (EBDITA) 1,922 1,758 -8.5% 7,824 7,930 1.4%
EBDITA margin (%) 19.9% 19.3%   20.0% 21.6%  
Other income 64 68 6.4% 210.8 345.4 63.9%
Finance costs 96 40 -58.8% 441.3 298.2 -32.4%
Depreciation 558 374 -33.0% 2,195 1,487 -32.3%
Profit before tax 1,332 1,413 6.1% 5,398 6,490 20.2%
Pretax margin (%) 13.8% 15.5%   13.8% 17.7%  
Tax 427 454 6.3% 1,795 2,113 17.7%
Effective tax rate (%) 32.1% 32.2%   33.3% 32.6%  
Profit after tax/(loss) 905 959 6.0% 3,603 4,377 21.5%
Net profit margin 9.4% 10.5%   9.2% 11.9%  
No. of shares (m)         140  
Diluted earnings per share (Rs)*         31.3  
Price to earnings ratio (x)*         12.1  

What has driven performance in 4QFY15?
  • The revenues for the quarter declined by 5.3% YoY .The CNG sales volume during the quarter grew by 4 % YoY and piped natural gas (PNG) sales volume decreased by 14 % YoY over the corresponding quarter in the last fiscal (overall volumes up by 1% YoY). For full year, CNG sales volumes grew by 4% YoY while PNG sales volumes declined by 7% YoY. Net sales for the year declined by 6.1% YoY on account of sharp reduction in CNG and domestic PNG prices. For the year, the average daily gas sales volumes stood at 3.84 million standard cubic metres per day (mscmd), as compared to 3.79 mscmd in FY14.

  • The operating profit margin for the quarter declined by 0.6% (YoY) to 19.3% on account of substantial increase in the other expense for the quarter. However, a decline in the raw material cost (as a % of sales) supported the profit margins.

    Cost summary
    (Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
    Consumption of raw materials (natural gas) 6,652 6,045 -9.1% 26,292 23,408 -11.0%
    as a % of sales 69.0% 66.2%   67.3% 63.8%  
    Staff costs 145 166 14.6% 595.6 660.1 10.8%
    as a % of sales 1.5% 1.8%   1.5% 1.8%  
    Other expenditure 941 1,198 27.4% 4426.8 4,811 8.7%
    as a % of sales 9.8% 13.1%   11.3% 13.1%  
    Total expenditure 7,738 7,410 -4.2% 31,314 28,880 -7.8%
    as a % of sales 80.2% 81.2%   80.1% 78.7%  

  • The net profits margin for the quarter increased to 10.5% from 9.4% in 4QFY15 on account of decline in depreciation expense (revised depreciation policy) and decline in finance costs for the quarter.

  • For FY15, net profit growth came in at 21.5%, driven mainly by revision in depreciation rates, slightly lower effective tax rates, increase in other income and decline in finance costs.
What to expect?

The cost competitiveness of CNG and PNG as compared to other liquid fuels will determine the growth in volumes. As price of sourcing gas goes up, IGL's ability to pass prices will be put to test.

The company has recently hiked price for CNG and PNG in the month of May as the dollar has appreciated ( base price of natural gas that is procured by IGL is dollar linked )and to offset the impact of increase in minimum wages. A positive development is that the company's debt has come down significantly. . Acquisition of 50% stake in MNGL is likely to provide company access to markets in Maharashtra.

As far as PNG is concerned, the volume trend is far from encouraging and has declined due to slowdown in demand in industrial segments

There is a regulatory uncertainty regarding Petroleum and Natural Gas Regulatory Board's (PNGRB) order. Apart from that, the Delhi Development Authority (DDA) has raised a demand of Rs 1.6 bn (retrospectively from FY08) due to increase in license fees for sites taken by the company on lease or for setting up CNG stations. The company has filed a writ petition in High Court against this demand and the matter is subjudice.

The stock is currently trading at a P/E ratio of 12.6 times. We are in the process of updating our estimates for IGL and will come up with a revised target price very soon. Until then, we recommend investors not to buy the stock .

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also, within your overall exposure to equities, please ensure that you broadly follow our suggested asset allocation and that no single large cap stock comprises more than 5% of your portfolio.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

INDRAPRASTHA GAS SHARE PRICE


Dec 15, 2017 (Close)

TRACK INDRAPRASTHA GAS

  • Track your investment in INDRAPRASTHA GAS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON INDRAPRASTHA GAS

INDRAPRASTHA GAS 8-QTR ANALYSIS

COMPARE INDRAPRASTHA GAS WITH

MARKET STATS