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Indraprastha Gas Ltd: Profits up on higher volumes. - Views on News from Equitymaster
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  • Aug 2, 2011 - Indraprastha Gas Ltd: Profits up on higher volumes.

Indraprastha Gas Ltd: Profits up on higher volumes.
Aug 2, 2011

Indraprastha Gas Ltd. (IGL) has announced the first quarter results for financial year 2011-2012 (1QFY12).For the quarter, the company has reported a 60% YoY growth in topline and 40% YoY growth in the bottomline respectively. Here is our analysis of the results.

Performance summary
  • The topline registered an increase of 60% YoY during the quarter.
  • The operating profits increased by 47% during the quarter with margins at 29.5%, down by 2.5% (YoY).
  • The net profits for the quarter registered an increase of 40% YoY, with margins at 15%, down 2.1% (YoY).

Financial snapshot
(Rs m) 1QFY11 1QFY12 Change
Net Sales 3,358 5,374 60.0%
Expenditure 2,283 3,791 66.0%
Operating profit (EBDIT) 1,075 1,583 47.3%
Operating profit margin (%) 32.0% 29.5%  
Other income 10.9 13.5 23.7%
Interest expense/(income) 0 90.1 na
Depreciation 231 322 39.5%
Profit before tax 855 1,185 38.6%
Profit before tax margin (%) 25.46% 22.04%  
Tax 283.4 384.0 35.5%
Net profit 571 801 40.1%
Net profit margin (%) 17.0% 14.9%  
No. of shares   140  
Diluted Earnings per share (Rs)*   20.2  
P/E ratio (x)*   21.0  
*On a trailing 12-months basis

What has driven performance in 1QFY12?
  • The topline soared 60% YoY during quarter on account of higher volumes and improved realizations.

  • The operating profits registered 47% YoY growth on back of a strong growth in the topline. However, the margins took a beating of 2.5% (YoY) on account of higher gas costs, thus increasing raw material costs from 50% to 56% (as a % of sales). The other cost components like staff costs and 'other expenditure' declined by 0.9% (as a % of sales) and 2.8% (as a % of sales).

  • The net profit for the quarter was up 40% as a result of growth in the topline. However, the net profit margins declined to 14.9% versus 17.0% last year on account of higher gas costs.
  • Cost break-up...
    (Rs m) 1QFY11 1QFY12 Change
    Consumption of raw materials 1,667 3,004 180.2%
    as a % of sales 49.6% 55.9%  
    Staff costs 92 99 108.4%
    as a % of sales 2.7% 1.9%  
    Other expenditure 524 687 131.0%
    as a % of sales 15.6% 12.8%  
    Total expenditure 2,283 3,791 166.0%
    as a % of sales 68.0% 70.5%  

What to expect?

We expect the margins in the near term to remain constrained due to declining gas supplies and rising gas costs.

With regards to valuation, at a current stock price of Rs 424, the stock is trading at 21 times trailing 12 months earnings and 13 times estimated FY14 earnings. While the stock has come very close to our target price since last recommendation, we believe that the stock may still have some upside left. In view of the same, we maintain our HOLD view on the stock.

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