Buy Indraprastha Gas; target of Rs 428: KRChoksey

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Buy Indraprastha Gas; target of Rs 428: KRChoksey

KRChoksey is bullish on Indraprastha Gas (IGL) and has recommended buy rating on the stock with a target of Rs 428 in its January 27, 2012 research report.

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KRChoksey is bullish on Indraprastha Gas (IGL) and has recommended buy rating on the stock with a target of Rs 428 in its January 27, 2012 research report.

"IGL reported results which were in line with our estimates at bottom line. Total income was 45% up on Y-o-Y basis to Rs 661 cr, mainly on account overall 26% volume growths in business. EBITDA during the quarter was at Rs.151 cr, growth of 16%. Sharp drop in EBIDTA margin by 375 bps to 22.69% sequentially, mainly due to higher cost of imported LNG, depreciating rupee and delay in pass on rise in cost to customer across all segment. Jump in interest cost because of higher interest rate scenario and the company raised loans in Q3FY12 for funding its capex plans in NCR region."

"During the quarter 16.1% Growth in CNG volume to 239mmscm, this growth is backed by higher conversion of private cars to the CNG (~ 5500 cars/month). In terms of fuel efficiency CNG stands at top level in comparison with diesel and petrol. CNG is 25% more efficient against Diesel and 55% compare to petrol, going forward DTC will add a fleet of 4,000 CNG buses in next 2 year and Govt. is planning to decontrol diesel prices which will be major boost for IGL's CNG business. Currently the company is selling CNG & PNG at a run rate of 3.5mmscmd and expected to touch 3.65mmscmd by the end of FY12. 235 CNG stations are now operational fully and 15 new CNG stations will be operational in Q4FY12. Rising demand of PNG from industrial and commercial segment posted 66% growth on Y-o-Y basis to 71.2mmscm. We observed Inelastic demand growth in PNG volume even frequent price hike. The Piped Natural Gas (PNG) segment which includes the relatively under penetrated domestic households (8%) and industrial/commercial customers are expected to be the key catalyst for growth going forward."

"Driven by robust demand in the CNG segment and increasing revenues from PNG segment led by industrial volumes, The aggressive expansion plans for establishing the CNG and PNG infrastructure in the operational areas of IGL will reap rich dividends going forward. At current market price of Rs 347, the stock trades at a P/E of 15.6X and 12.9x for FY12E and FY13E respectively. We maintain 'Buy' on the stock with a price target of Rs 428 per share," says KRChoksey research report.

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To read the full report click on the attachment