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Indraprastha Gas 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Indraprastha Gas (IGL)’s 3QFY2013 top-line grew by 31.1% yoy. However, EBITDA and PAT grew by only 24.9% yoy and 24.3% yoy on account of higher RLNG and taxes. We maintain our Neutral recommendation on the stock. Top-line driven by volume and realizations growth: The company’s net sales grew by 31.1% yoy to Rs.869cr, mainly driven by increases in both, sales as well as realization. CNG and PNG volumes increased by 7.6% and 17.4% yoy to 194mn kg and 84mmscm, respectively.

OPM contracts on cost pressures: Cost of goods sold increased by 36.1% yoy to Rs.576cr, mainly on account of higher RLNG costs. Despite higher growth in net sales, EBITDA grew by only 24.9% yoy to Rs.188cr in 3QFY2013. EBITDA margin slipped 107bp yoy to 21.6% in 3QFY2013. Hence, net profit grew by only 24.3% yoy to Rs.86cr.

CNG price hiked by 4.0%: IGL has hiked CNG prices by 4.0% during January 2013 on account of higher cost of non-APM gas.

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 growth to remain muted 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 10.1x and 9.6x FY2013E and FY2014E earnings, respectively. We maintain our Neutral rating on the stock.