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Hold Indraprastha Gas Ltd For Target Rs.330 – Emkay Global

Strong volume growth led by CNG, industrial PNG; margin upside capped

* Indraprastha Gas (IGL) reported EBITDA/PAT of Rs3.31bn/2.26bn, up 20%/29% yoy, 4%/14% qoq and in line/13% above our estimates due to higher Other Income of Rs513mn from Rs150mn in MNGL dividends and a lower tax rate of 32% (est.: 36%).

* Gas sales volume grew a strong 17% yoy/6% qoq to 6.3mmscmd (4% above est.), with CNG/PNG up 15%/20% yoy. Domestic and third-party trading PNG grew 13% each yoy, while industrial/commercial volumes were up 30% yoy/13% qoq.

* Gross margin rose 2% qoq to Rs11.3/scm (in line), with gas costs coming down by 4%, but realization fell 2% due to higher share of industrials. Opex/scm rose 4% qoq/6% yoy to Rs5.4. Hence, EBITDA/scm was flat qoq/up 3% yoy at Rs5.9, a 4% miss vs. estimate.

* IGL has delivered consistent performance; however, valuation at 19x FY21E consol. EPS largely captures double-digit volume growth going forward. Raise FY20/21E EBITDA by 2%/3%, PAT 5%/6%, and DCF-SOTP TP by 2% to Rs330; maintain Hold.


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