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Indraprastha Gas Limited (INDGAS) :Higher costs dent margins…
Indraprastha Gas (IGL) declared its Q3FY11 results with revenues of |
457.1 crore, EBITDA of | 129.3 crore and PAT of | 67.2 crore. The
profitability was lower than our estimates mainly due to higher raw
material costs. Increased sales volumes in the CNG segment and natural
gas sales volume to Haryana City Gas and Adani for Faridabad
contributed to a 24.1% YoY increase in volumes for Q3FY11 to 249.2
mmscm (2.71 mmscmd). In Q3FY11, blended sales prices were increased
27.9% YoY to | 20.4 per scm, mainly to pass on increased raw material
costs. We expect IGL’s volumes to increase to 975 mmscm, 1139
mmscm and 1307 mmscm in FY11E, FY12E and FY13E, respectively. We
recommend an ADD rating on the stock with a price target of | 352.
ƒ Increase of 24.1% YoY in gas sales volume
IGL reported a 24.1% increase in gas sales volume from 200.8
mmscm in Q3FY10 to 249.2 mmscm in Q3FY11. The CNG and PNG
gas sales volume increased by 15.5% and 92.4% YoY, respectively,
to 205.9 mmscm and 43.3 mmscm in Q3FY11, respectively. We
expect the total sales volume to increase from 772.1 mmscm in
FY10 to 975 mmscm, 1139 mmscm and 1307 mmscm in FY11E,
FY12E and FY13E, respectively.
ƒ Realisations improve YoY mainly on account of CNG price hikes
Realisations improved YoY on the back of price increases taken in
the CNG segment. CNG and PNG realisations stood at | 21 per scm
and | 19.4 per scm, respectively, for Q3FY11. The impact of price
hike in the CNG segment from | 27.5 per kg to | 29 per kg would be
visible from the current quarter.
Valuation
We expect IGL to report steady growth on account of higher capex,
increasing pipeline network and higher conversion to CNG vehicles. We
have valued the stock based on the DCF methodology with a price target
of | 352 (WACC – 11.4%, terminal growth – 3%).
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