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IGL: Steady performance continues - Views on News from Equitymaster

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IGL: Steady performance continues
Nov 13, 2008

Performance summary
  • Topline increases by 24% YoY during 2QFY09.
  • EBITDA margin declines to 40% during 2QFY09, down from 43% in 2QFY08.
  • Other income grows by 32% YoY.
  • Bottomline registers a growth of 17% YoY during 2QFY09 owing to growth in the topline and higher other income.
  • For 1HFY09, the topline grows by 21% while the bottom line grows by 16%


Financial snapshot

(Rs m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Net sales 1,747 2,167 24.0% 3,371 4,083 21.1%
Expenditure 991 1,301 31.3% 1,921 2,453 27.7%
Operating profit (EBDITA) 757 866 14.4% 1,450 1,630 12.4%
EBDITA margin (%) 43.3% 40.0%   43.0% 39.9%  
Other income 41 54 31.6% 75 108 44.1%
Depreciation 158 169 6.5% 314 332 5.8%
Profit before tax 639 751 17.5% 1,211 1,405 16.1%
Tax 211 249 18.3% 398 467 17.3%
Profit after tax/(loss) 428 502 17.1% 813 939 15.5%
Net profit margin (%) 24.5% 23.2%   24.1% 23.0%  
No. of shares (m)         140  
Diluted earnings per share (Rs)*         13  
Price to earnings ratio (x)*         8  
*On trailing twelve months earnings

What has driven performance in 2QFY09?
  • During 1QFY09, IGL has received a demand of Rs 64.7 m towards charges pertaining to excess drawl of natural gas. The company has not provided for the amount, as it believes that it is not payable as per the contractual terms.

  • The company has not disclosed much information regarding its operations in this quarter.

What to expect?
At the current price of Rs 106, the stock is trading at a multiple of 6.9 times our FY11E 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 NCR region, given its early mover advantage and a strong track record. However, we are concerned about the insufficient disclosure practices of the company with respect to its operating performance.

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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