Indraprastha Gas Ltd: Favorable Policies Boost Prospects

Indraprastha Gas Ltd (IGL) has announced its results for the quarter and the year ended December 2015. The company has reported 1.5% year on year (YoY) decline in the revenues while net profit for the quarter declined by 2.8% YoY. Here is our analysis of the results.

Performance summary

• The revenues for the quarter declined by 1.5% YoY. For 9MFY16, the revenues were up by 1.3% YoY.
• The operating profit for the quarter declined by 1.9% YoY. However, operating profit margin were flat (YoY) at 20.0%. For 9MFY16, operating profit margin stood at 20.3%, down from 22.1% in 9MFY15.
• The net profit for the quarter declined by 2.8% YoY with net profit margins at 11.3%, down from 11.5% in the corresponding quarter last year. For 9MFY16, the net profit margin stood at 11.1%, down from 12.4% in 9MFY15.
  
  

  Financial performance snapshot

  Rs m	3QFY15	3QFY16	Change	9MFY15	9MFY16	Change
  Sales	9,410	9,269	-1.5%	27,570	27,922	1.3%
  Other operating income	34	23	-33.1%	72	80	11.6%
  Total income	9,444	9,292	-1.6%	27,642	28,002	1.3%
  Expenditure	7,524	7,419	-1.4%	21,470	22,254	3.7%
  Operating profit (EBDITA)	1,886	1,850	-1.9%	6,100	5,668	-7.1%
  EBDITA margin (%)	20.0%	20.0%		22.1%	20.3%
  Other income	114	112	-1.5%	277	233	-15.8%
  Finance costs	63	18	-72.4%	259	81	-68.9%
  Depreciation	376	399	6.3%	1,114	1,179	5.9%
  Profit before tax	1,595	1,569	-1.6%	5,077	4,722	-7.0%
  Pretax margin (%)	17.0%	16.9%		18.4%	16.9%
  Tax	513	517	0.9%	1,659	1,636	-1.4%
  Effective tax rate (%)	32.2%	33.0%		32.7%	34.6%
  Profit after tax/(loss)	1,082	1,051	-2.8%	3,418	3,086	-9.7%
  Net profit margin	11.5%	11.3%		12.4%	11.1%
  No. of shares (m)					140
  Diluted earnings per share (Rs)*					28.9
  Price to earnings ratio (x)*					19.1

  *On the basis of last 12 months

What has driven performance in 3QFY16?

• IGL's average sales volumes for 9MFY16 stood at 3.97 million standard cubic metres per day (mscmd) versus an average volumes sales of 3.84 mscmd in FY 15, up 3.4%.
• Average CNG (compressed natural gas) sales for 9MFY16 stood at 2.27 million kilograms per day (versus 22.07 million kg per day in FY15). During the quarter, CNG and PNG sales volumes grew by around 5.1% YoY. Revenues declined due to decline in the price of CNG and PNG.
• The operating margin for the quarter were stable on a year on year basis as decline in the input gas cost was offset by increase in other expenditure.
• Net profit margin too were almost flat on a year on year (YoY) basis. The interest cost declined by 72% YoY. The depreciation expense was up 6.3% YoY.
  
  

  Cost summary

  (Rs m)	3QFY15	3QFY16	Change	9MFY15	9MFY16	Change
  Consumption of raw materials (natural gas)	6,112	5,685	-7.0%	17,363	17,512	0.9%
  as a % of sales	65.0%	61.3%		63.0%	62.7%
  Staff costs	163	244	49.1%	494	581	17.5%
  as a % of sales	1.7%	2.6%		1.8%	2.1%
  Other expenditure	1,249	1,490	19.3%	3,613	4,161	15.2%
  as a % of sales	13.3%	16.1%		13.1%	14.9%
  Total expenditure	7,524	7,419	-1.4%	21,470	22,254	3.7%
  as a % of sales	80.0%	80.0%		77.9%	79.7%