Sharekhan's research report on Indraprastha Gas
Q1FY23 PAT of Rs. 421 crore (up 16.4% q-o-q) was above our estimate led by a stronger-than-expected EBITDA margin, slight beat in volumes and a lower-than-expected tax rate. EBITDA margin of Rs. 8.6/scm (up 20% q-o-q) was 9% above our estimate led by lower-than-expected gas costs as reflected in higher gross margins of Rs. 14.3/scm (up 12% q-o-q). Gas sales volumes of 7.9 mmscmd, up 2% q-o-q led by 5% q-o-q rise in CNG volume partially offset by 5%/15% q-o-q decline in I-C/ D-PNG volumes. Likely further hike in domestic gas prices would be an overhang on margins in FY23 while volume growth outlook remains strong supported by ramp-up of new GAs and sustained volume uptick in NCR market.
We maintain a Buy on IGL with an unchanged PT of Rs. 450 as valuation of 16.9x FY24E EPS is attractive, given a steep discount of 29% to its five-year average one-year forward PE multiple of 24x.
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