Accumulate Indraprastha Gas; tgt of Rs 397: Arihant capital

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Accumulate Indraprastha Gas; tgt of Rs 397: Arihant capital

Arihant capital markets is bullish on Indraprastha Gas (IGL) and has recommended accumulate rating on the stock with a target of Rs 397 in its January, 2012 research report.

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Arihant capital markets is bullish on Indraprastha Gas (IGL) and has recommended accumulate rating on the stock with a target of Rs 397 in its January, 2012 research report.

"Indraprastha Gas (IGL)'s net sales during the quarter grew 45% yoy to Rs 663cr largely on account of higher volumes and realisation at CNG segment. CNG volumes during the quarter increased by 16% yoy to 179.8mn kgs, while realisations grew 16% yoy to Rs 32/kg as company revised CNG prices upward by Rs 2/kg in Oct-11. Similarly, PNG volumes increased 64% yoy to 71.1mmscmd and realisation grew by 16%yoy to Rs 22.5/scm."

"IGL's EBITDA margins compressed 560bps and 370bps on yoy and qoq basis largely on account of higher RLNG prices and depreciation of rupee against dollar. The company posted EBITDA margin of 22.7% during the quarter compared to 26.4% in 2QFY12 and 28.3% during 3QFY11. Consequently, EBITDA for 3QFY12 stood at Rs 150cr, growing 16.4% yoy, while declining 4.8% qoq. IGL reported 2.9% yoy jump in PAT to Rs 69cr (Rs 67cr). Higher depreciation and interest cost, which grew 41% and 229% yoy, resulted into lower profitability."

"IGL has undertaken ~Rs2000cr capex to augment both CNG and PNG capacities in NCR region and we expect it to clock robust volume growth over next couple of years. However, we expect margins to remain under pressure due to increased spot purchases, currency depreciation and reduced availability of KG-D6 gas. The stock had corrected significantly owing to uncertainty prevailing over possible cap on marketing margins that IGL charges. At current market price of Rs 348, the stock trades at a P/E of 15x and 13x for FY12E and FY13E earnings respectively. Post corrections in the stock we now ascribe accumulate rating on IGL with price objective of Rs 397," says Arihant capital markets research report.

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