Prabhudas Lilladher's research report on Indraprastha Gas
We lower our FY23-25E earnings by 21-11% given 1) delayed implementation of Mr Kirit Parikh committee recommendations to bring down domestic gas prices by USD2/mmbtu and 2) lower margins (FY23/24/25 at Rs7.0/7.6/7.7 vs Rs8.4/8.5/8.6 earlier). Indraprastha Gas (IGL) Q3 EBIDTA/PAT dropped to Rs4.3bn (-19%Q/Q; PLe Rs4.8bn) and Rs2.8bn (-33%Q/Q; PLe Rs3.3bn) due to lower margins and volumes. Volumes were flat QoQ and up 8%YoY at 8.1mscmd. Domestic gas prices are likely to correct going forward. Also international gas prices have corrected (spot LNG at USD15-20/mmbtu vs Q3 levels of over USD30), which will mean lower gas prices for domestic CGD players. Moreover, availability of 12mmscmd new RILKGD6’s volumes will ease gas availability concerns.
Outlook
IGL remains an enviable business model with high volume growth due to geographical expansion and addition of new buses and taxis. Reiterate ‘BUY’ at DCF-based PT of Rs564 (Rs596) as we lower margins and profits.
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