Sharekhan's research report on Indraprastha Gas
Q4FY21 operating profit of Rs. 492 crore (up 31% y-o-y) lagged our estimate as EBITDA margin missed estimates at Rs. 8/scm (down 7.9% q-o-q) but gas sales volume growth of 9.5% y-o-y to 6.8 mmscmd was much ahead of our/street’s expectations. CNG/domestic-PNG/I/C PNG volumes rose strongly by 8.3%/11%/20% y-o-y; EBITDA margin declined was due to 6.5% q-o-q contraction in gross margin to Rs. 13.6/scm offsetting the benefit of an 8.9% y-o-y decline in per unit opex. We cut our FY22E EPS to factor lower volumes in Q1FY22 amid COVID-led lockdowns but remain confident of long-term volume growth prospects given structural gas demand drivers. IGL well placed to sustain high margin but OMCs’ demand of high dealer commissions would remain a near-term overhang.
Outlook
IGL’s recent underperformance to Gujarat Gas is an opportunity to invest in the stock as long-term volume/margin outlook remains intact. Hence, we a maintain a Buy on IGL with an unchanged PT of Rs. 650. At CMP, the stock trades at 22.6x its FY23E EPS.
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