Sharekhan's research report on Indraprastha Gas
Q4FY22 operating profit of Rs. 500 crore (up 6.6% q-o-q) was in line with street estimates but 2.7% below our estimate due to lower-than-expected margin. PAT of Rs. 362 crore (up 17% q-o-q) beat estimate by 7% on higher other income. Volumes of 7.7 mmscmd was slightly above our estimate but witnessed only 1.2% q-o-q rise due to impact of third wave of COVID-19. EBITDA margins improved by 7.7% q-o-q to Rs7.2/scm (up 7.7% q-o-q) but missed estimate on high gas costs. Elevated gas cost to remain an overhang on margin in FY23 although IGL has pricing power in CNG/D-PNG. We expect ramp-up from new GAs to drive double-digit volume growth.
Outlook
A steep fall in the stock price makes valuations attractive at 16.3x FY24E EPS and thus we maintain our Buy on IGL with a revised PT of Rs. 450. Further hikes in domestic gas prices, lower APM gas allocation and likely faster implementation of electric vehicle policy in Delhi could remain an overhang on IGL.
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