Indraprastha Gas - 1QFY2013 Result Update - Angel Broking

We resume coverage on Indraprastha Gas (IGL). For 1QFY2013, IGL's top-line grew by 41.5% yoy in 1QFY2013. However, EBITDA and PAT grew by only 13.2% yoy and 5.7% yoy on account of higher RLNG and interest costs. We maintain our Neutral view on the stock.

Top line driven by volume and realizations growth: Net sales growth of 41.5% yoy to Rs.760cr was driven by increases in both, sales as well as realization. CNG and PNG volumes increased by 13.5% and 23.5% yoy to 183mn kg and 80mmscm, respectively. Average CNG realization increased 20.8% yoy to Rs.35/kg and Average PNG realization increased 27.6% yoy to Rs.25/scm.

OPM contracts on cost pressures: Cost of goods sold increased 63.0% yoy to Rs.490cr mainly on account of higher RLNG costs. Hence, despite higher growth in net sales, EBITDA grew by only 13.2% yoy to Rs.179cr in 1QFY2013 and EBITDA margin slipped 589bp yoy to 23.6% in 1QFY2013. Further, interest expense stood at Rs.16cr in 1QFY2013, compared to Rs.9cr in 1QFY2012. Hence, net profit grew by only 5.7 % yoy to Rs.85cr.

Outlook and valuation: IGL has frequently raised prices of CNG and PNG. However, as the proportion of costly gas is expected to increase, we expect the company's margin to soften in the years ahead. Further, the recent proposal to cap gas marketing margin by PNGRB remains an overhang on the stock. On the valuation front, at the current level, the stock is trading at 9.5x and 8.5x FY2013E and FY2014E earnings, respectively. We recommend Neutral rating on the stock.

Source : Equity Bulls

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