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Indraprastha Gas
Management meeting key takeaways
Faridabad/Gurgaon dispute resolution could take time
Resolution of the Faridabad/Gurgaon dispute may take a while and is separate from
the Petroleum & Natural Gas Regulatory Board (PNGRB) issue. Owing to the
PNGRB Supreme Court case, the award of Round 3 and 4 of CGD may take time.
The next Supreme Court hearing is likely to be on 3 May 2011.
Clubbing of Ghaziabad in the APM allocation positive
Indraprastha Gas (IGL) has been requesting the government to combine the
Administered Price Mechanism (APM) allocation for the National Capital Region
(NCR), and hence, optimise the use of RLNG. If the same is approved, then it is
positive for Ghaziabad expansion and RLNG consumption could ease slightly in
the near future. Both CNG and domestic PNG require cheaper gas, while LNG is
unviable. Management is aiming for US$1bn revenue by 2015-16 (an implied
CAGR of 34%).
Continues to expect 20-24% overall sales volume growth
IGL management expects 20-24% total gas sales volume growth propelled by
higher sales to industrial and commercial customers. CNG volume is likely to grow
12% YoY. IGL is likely to retain its market dominance. IGL intends to pursue
benchmarking of tariffs with the PNGRB. Investor concerns on the regulator
capping returns should ease in the medium term, as for ROE to decline to 18%,
end-user gas prices will only have to fall 6%, in our view.
Valuation: favourable growth; maintain Buy with Rs400 price target
We believe favourable gas economics, strong expansion in the NCR, potential new
areas, high asset utilisation, and a strong balance sheet with low leverage are
positives for the stock. We derive our price target from a DCF-based methodology
and explicitly forecast long-term valuation drivers using UBS’s VCAM tool.
Indraprastha Gas
Indraprastha Gas (IGL) was incorporated in 1998 and it took over GAIL's Delhi
city gas distribution project in 1999. IGL is a retail city gas distributor that
supplies compressed natural gas (CNG) to the auto sector and piped natural gas
(PNG) to the residential, industrial and commercial segments. IGL's business is
weighted towards CNG, with CNG generating 88.8% of total revenue in FY10.
It operates in the National Capital Territory (NCT) of Delhi, and in National
Capital Regions such as Noida, Greater Noida and Ghaziabad.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Indraprastha Gas
Management meeting key takeaways
Faridabad/Gurgaon dispute resolution could take time
Resolution of the Faridabad/Gurgaon dispute may take a while and is separate from
the Petroleum & Natural Gas Regulatory Board (PNGRB) issue. Owing to the
PNGRB Supreme Court case, the award of Round 3 and 4 of CGD may take time.
The next Supreme Court hearing is likely to be on 3 May 2011.
Clubbing of Ghaziabad in the APM allocation positive
Indraprastha Gas (IGL) has been requesting the government to combine the
Administered Price Mechanism (APM) allocation for the National Capital Region
(NCR), and hence, optimise the use of RLNG. If the same is approved, then it is
positive for Ghaziabad expansion and RLNG consumption could ease slightly in
the near future. Both CNG and domestic PNG require cheaper gas, while LNG is
unviable. Management is aiming for US$1bn revenue by 2015-16 (an implied
CAGR of 34%).
Continues to expect 20-24% overall sales volume growth
IGL management expects 20-24% total gas sales volume growth propelled by
higher sales to industrial and commercial customers. CNG volume is likely to grow
12% YoY. IGL is likely to retain its market dominance. IGL intends to pursue
benchmarking of tariffs with the PNGRB. Investor concerns on the regulator
capping returns should ease in the medium term, as for ROE to decline to 18%,
end-user gas prices will only have to fall 6%, in our view.
Valuation: favourable growth; maintain Buy with Rs400 price target
We believe favourable gas economics, strong expansion in the NCR, potential new
areas, high asset utilisation, and a strong balance sheet with low leverage are
positives for the stock. We derive our price target from a DCF-based methodology
and explicitly forecast long-term valuation drivers using UBS’s VCAM tool.
Indraprastha Gas
Indraprastha Gas (IGL) was incorporated in 1998 and it took over GAIL's Delhi
city gas distribution project in 1999. IGL is a retail city gas distributor that
supplies compressed natural gas (CNG) to the auto sector and piped natural gas
(PNG) to the residential, industrial and commercial segments. IGL's business is
weighted towards CNG, with CNG generating 88.8% of total revenue in FY10.
It operates in the National Capital Territory (NCT) of Delhi, and in National
Capital Regions such as Noida, Greater Noida and Ghaziabad.
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