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Indraprastha Gas: Riding on robust demand

Oct 28, 2009

Performance summary
  • Topline grows by 26% YoY during 2QFY10 on the back of higher volumes sold.
  • EBITDA margin declines to 37% during 2QFY10, down from 40% in 2QFY09 due to higher raw material cost and other expenditure (as a percentage of sales).
  • Other income declines by 20% YoY.
  • Bottomline registers a growth of 13% YoY during 2QFY10. It is lower than topline growth due to the contraction in operating margins.

Financial snapshot
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales 2,167 2,738 26.4% 4,083 5,078 24.4%
Expenditure 1,301 1,731 33.1% 2,453 3,208 30.8%
Operating profit (EBDITA) 866 1,007 16.3% 1,630 1,870 14.7%
EBDITA margin (%) 40.0% 36.8%   39.9% 36.8%  
Other income >54 43 -20.4% 108 93 -13.6%
Depreciation 169 194 14.9% 332 379 14.3%
Profit before tax 751 856 14.0% 1,405 1,583 12.7%
Tax 249 288 15.7% 467 533 14.1%
Profit after tax/(loss) 502 568 13.2% 939 1,051 12.0%
Net profit margin (%) 23.2% 20.7%   23.0% 20.7%  
No. of shares (m)         140  
Diluted earnings per share (Rs) *         13  
Price to earnings ratio (x) *         12.2  
* On a trailing 12 months basis

What has driven performance in 2QFY10?
  • IGLís CNG (compressed natural gas) volumes grew by 15% YoY during 2QFY10, while PNG (piped natural gas) volumes increased by 28% YoY during the quarter. Overall, the company registered a 16% YoY growth in volumes during the quarter which is reflected in the topline growth in value terms.
    Particulars 2QFY09 2QFY10 Change
    CNG (m kgs) 117 134 14.7%
    PNG (m scm) 13 17 27.8%
    Overall (m scm) 167 193 15.8%
    m scm Ė million standard cubic meter

  • Product wise, CNG recorded sales of Rs 2.8 bn, registering a growth of 25% during 2QFY10 and PNG recorded sales of Rs 322 m registering a growth of 37% during the quarter. CNG sales volume and value mentioned above also includes sale of natural gas in the cities of Gurgaon and Faridabad.

  • IGLís margins suffered during 2QFY10 primarily on the back of higher other expenditure, which grew by 33% in absolute terms and 2% (as a percentage of sales). Raw material costs increased by 1% as a percentage of sales during the quarter.

What to expect?
At the current price of Rs 160, the stock is trading at a multiple of 10 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.

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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Feb 17, 2020 03:29 PM


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