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Indraprastha Gas: Burning bright - Views on News from Equitymaster

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Indraprastha Gas: Burning bright
Jul 31, 2009

Performance summary
  • Topline grows by 22% YoY during 1QFY10 on the back of higher volumes sold.
  • EBITDA margin declines to 36.9% during 1QFY10, down from 39.9% in 1QFY09 due to higher other expenditure (as a percentage of sales).
  • Other income declines by 7% YoY.
  • Bottomline registers a growth of 11% YoY during 1QFY09. It is lower than topline growth due to the contraction in operating margin.


(Rs m) 1QFY09 1QFY10 Change
Net sales 1,916 2,339 22.1%
Expenditure 1,152 1,477 28.2%
Operating profit (EBDITA) 764 863 12.9%
EBDITA margin (%) 39.9% 36.9%  
Other income 54 50 -6.9%
Depreciation 164 186 13.6%
Profit before tax 654 727 11.1%
Tax 218 244 12.2%
Profit after tax/(loss) 437 483 10.5%
Net profit margin (%) 22.8% 20.6%  
No. of shares (m)   140.0  
Diluted earnings per share (Rs) *   12.6  
Price to earnings ratio (x) *   11.3  
* On a trailing 12 months basis

What has driven performance in 1QFY10?
  • IGL’s CNG (compressed natural gas) volumes grew by 16% YoY during 1QFY10, while PNG (piped natural gas) volumes increased by 51% YoY during the quarter. Overall, the company registered a 19% YoY growth in volumes during the quarter which is reflected in the topline growth in value terms.

    Volumes
    Particulars 1QFY09 1QFY10 Change
    CNG (m kgs) 104 121 15.9%
    PNG (m scm) 12 18 50.9%
    Overall (m scm) 148 175 18.6%
    m scm – million standard cubic meter

  • IGL’s margins suffered during 1QFY10 primarily on the back of higher other expenditure, which grew by 47% in absolute terms and 2.7% (as a percentage of sales). Raw material costs remained constant as a percentage of sales during the quarter.

  • IGL has received a demand of Rs. 22.2 m during 1QFY10 towards service charges on the purchase of natural gas. The aggregate of such demand as at 30 June, 2009 amounts to Rs. 65.9 m. The company has not provided for the charges as it is of the view that the amount is not payable and is disputing it with the supplier.

What to expect?
At the current price of Rs 143, the stock is trading at a multiple of 8.5 times our FY11 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.

Considering the well-entrenched position of the company, its debt free status, strong margins, return ratios and reasonable valuations, we hold a favourable view of the stock.

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Jul 23, 2018 01:33 PM

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