Indraprastha Gas - 2QFY2013 Result Update - Angel Broking

Indraprastha Gas's (IGL) 2QFY2013 top-line grew by 43.1% yoy. However, EBITDA and PAT grew by only 30.8% yoy and 28.5% yoy on account of higher RLNG and interest costs. Maintain Neutral.

Top-line driven by volume and realization growth: The company's net sales grew by 43.1% yoy to Rs.855cr mainly driven by increases in both, sales as well as realization. CNG and PNG volumes increased by 9.2% and 19.4% yoy to 194mn kg and 81mmscm, respectively. Average CNG realisation increased 28.1% yoy to Rs.37.9/kg.

OPM contracts on cost pressures: The cost of goods sold increased by 52.5% yoy to Rs.547cr mainly on account of higher RLNG costs. Hence, despite higher growth in net sales, EBITDA grew by only 30.8% yoy to Rs.207cr in 2QFY2013. The EBITDA margin slipped 228bp yoy to 24.2% in 2QFY2013. Further, interest expense stood at Rs.14cr in 2QFY2013, compared to Rs.12cr in 2QFY2012. Hence, net profit grew by only 28.5 % yoy to Rs.99cr.

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 Petroleum and Natural Gas Regulatory Board (PNGRB) remains an overhang on the stock. On the valuation front, at the current level, the stock is trading at 10.9x and 10.3x FY2013E and FY2014E earnings, respectively. We recommend Neutral rating on the stock.

Source : Equity Bulls

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