Indraprastha Gas - Better than expected volumes, margins - BRICS

IGL's Q4FY12 net profit was 11% above our expectations (up 17% yoy at Rs.808 mn) due to better-than-estimated volumes and gross margin. Our rating on the stock is under review pending the court verdict on its case against PNGRB mainly about the latter's decision to cut network tariffs by 60% retrospectively from April 2008.

Net profit up 17% on 3% volume and 8% margin growth

Net profit was up 17% yoy at Rs.808 mn on a 3% rise in volumes to 3.52 mmscmd (we expected 3.4 mmscmd) and a 7.5% rise in gross margin to Rs.8.2/scm vs. our expectation of Rs.8/scm. Profits were 11% above our estimate due to higher volumes, higher than expected gross margin, and a lower-than-expected tax rate at 31.5% (we assumed 33%). Also, since IGL changed the estimated life of some of its assets (and the written-down value of these assets amortized over the remaining useful life), depreciation for Q4 fell by Rs.34.8 mn to Rs.397 mn.

We have kept our rating under review given uncertainty surrounding its dispute with PNGRB. According to our calculations, the stock price does not discount refund of excess charge on PNG/CNG from FY09, factors in a gross margin of Rs.4/scm, and does not factor a further investment in network expansion.

Source : Equity Bulls

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