Indraprastha Gas - Result Update - ICICI Securities

Indraprastha Gas (IGL) reported its Q4FY20 results that were better than our estimates. The topline was flattish YoY at Rs. 1552.5 crore, above our estimates of Rs. 1437.2 crore due to higher-than-expected realisations as well as volumes. Volumes came in at 6.2 mmscmd (our estimate: Rs. 6 mmscmd). Gross margins were also above estimates and increased Rs. 1.4/scm YoY and Rs. 0.9/scm QoQ to Rs. 12.6/scm due to lower gas costs. Subsequently, EBITDA at Rs. 376.7 crore was better than estimates of Rs. 350.1 crore. On the profitability front, PAT increased 12.3% YoY to Rs. 253.4 crore and was above our estimates of Rs. 246.7 crore, aided by a lower tax rate.

Valuation & Outlook

The government's environmental concerns in Delhi have brought forth the urgency of using cleaner fuels, putting IGL in a sweet spot. IGL has a unique identity of a company with a rare mix of volume growth and strong margins, aided by favourable government initiatives towards CGD sector. We believe IGL's investment in Maharashtra Natural Gas (MNGL) and Central UP Gas (CUGL) is also adding value. However, due to Covid-19 initiated lockdown, CNG and industrial/commercial PNG sales dipped in the current quarter. We believe a recovery in demand will take time. Given the sharp run-up in the stock price, we downgrade the stock from BUY to HOLD and value standalone IGL at Rs. 409/share (21x FY22E EPS) and investment in CUGL and MNGL at Rs. 32/share to arrive at a target price of Rs. 440.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IGL_Q4FY20.pdf

Shares of INDRAPRASTHA GAS LTD. was last trading in BSE at Rs.449.5 as compared to the previous close of Rs. 473.9. The total number of shares traded during the day was 321363 in over 10186 trades.

The stock hit an intraday high of Rs. 475 and intraday low of 448.1. The net turnover during the day was Rs. 146080150.

Source : Equity Bulls

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