Hold Indraprastha Gas; target Rs 428: KRChoksey

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Hold Indraprastha Gas; target Rs 428: KRChoksey

KRChoksey has recommended hold rating on Indraprastha Gas (IGL) with a target price of Rs 428, in its October 21, 2011 research report.

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KRChoksey has recommended hold rating on Indraprastha Gas (IGL) with a target price of Rs 428, in its October 21, 2011 research report.

"Indraprastha Gas (IGL) reported results which were below our estimates at bottom line. Total income was 34% up on Y-o-Y basis to Rs 597 cr, mainly on account overall 24% volume growths in business. EBITDA during the quarter was at Rs.158 cr, growth of 26%. Sharp drop in EBIDTA margin by 261 bps to 26.4% sequentially, mainly due to higher LNG cost. Jump in interest cost because of higher interest rate scenario and the company raised loans in H1FY12 for funding its capex plans in NCR region. During the quarter company reported net profit of Rs.77 cr, growth of 17% on YoY basis."

"During the quarter 14% Growth in CNG volume to 239mmscm, this growth is backed by higher conversion of private cars to the CNG (~ 5000 cars/month). In terms of fuel efficiency CNG stands at top level in comparison with diesel and petrol, in month of Jun-11, Govt. has raised Diesel prices by Rs 3/lt. CNG is 30% more efficient against Diesel and 57% 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 3.34mmscmd and expected to touch 3.6mmscmd by the end of FY12. 50 new CNG stations will be operational in H2FY12. Rising demand of PNG from industrial and commercial segment posted 62% growth on Y-o-Y basis to 68mmscm. 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 401, the stock trades at a P/E of 18.1x and 15.0x for FY12E and FY13E respectively. We maintain 'HOLD' on the stock with a price target of Rs 428/ share," says KRChoksey research report.

Public holding more than 90% in Indian cos

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To read the full report click on the attachment