why i recommend to you all go with IGL on 17th Oct 2011.......Indraprastha Gas (Q2 FY12)......Rohit Saxena

Dear All,

 

Result analysis of IGL

• During Q2 FY12, IGL reported net sales of Rs5.98bn a jump of 33.7% yoy. Growth was driven by 14% yoy higher CNG volumes and 62.4% jump in PNG volumes. Realizations for CNG were higher by 8.5% yoy, while that of PNG were higher by 10.6% yoy following a price hikes implemented over the past few quarters to offset the impact of APM gas price hike and consumption of higher priced R-LNG. Sequentially IGL reported a revenue growth of 11.2% driven by both higher volumes and improved realizations.
  
• OPM was lower by 148bps yoy on account of increased raw material costs (higher APM gas price and increased consumption of R-LNG). On a sequential basis margins plummeted by 303bps. The gross margin per unit of products sold was flat on yoy basis but fell 7% sequentially. We believe the company would be able to maintain its gross margin per unit of products sold.

Key takeaways from the conference call

• Currently 15% of IGL's gas requirement is being met by R-LNG, majority of which is on contract basis. Small volumes of spot R-LNG is also purchased based on demand from industrial customers.
  
• At the beginning of Q3 FY12, the company raised prices of CNG to offset the impact of higher contribution of R-LNG in the supply basket.
  
• PNG volumes were below estimates owing to plant shutdowns at two of IGL's major industrial customers. Industrial sales were higher by 95% in value terms and by about 75% in volume terms. Volume growth would have been higher by 5-8% had it not been for the two shutdowns.
  
• Overall the company expects to register a 3-year volume CAGR of 20%. By FY16, the company expects contribution of CNG to reduce to 60%. For CNG, apart from addition of 60,000-70,000 private cars, the company expects 4,000 DTC buses to be added.
  
• For FY12, the company expects to spend about Rs6bn in capital expenditure of which Rs3bn has been spent in H1 FY12. For FY13, the company expects a spend of Rs5bn towards capital expenditure.

Financial results

(Rs m)	Q2 FY12	Q2 FY11	% yoy	Q1 FY12	% qoq
Net sales	5,975	4,468	33.7	5,374	11.2
Material costs	(3,581)	(2,547)	40.6	(3,004)	19.2
Personnel costs	(100)	(99)	1.3	(99)	0.7
Other overheads	(715)	(575)	24.2	(687)	4.1
Operating profit	1,580	1,247	26.6	1,583	(0.2)
OPM (%)	26.4	27.9	(148 )bps	29.5	(303) bps
Depreciation	(344)	(239)	44.2	(322)	6.9
Interest	(118)	(20)	482.6	(90)	30.4
Other income	15	5	178.2	13	11.2
PBT	1,133	994	14.0	1,185	(4.4)
Tax	(360)	(331)	8.9	(384)	(6.2)
Effective tax rate (%)	31.8	33.3		32.4
Adjusted PAT	772	663	16.5	801	(3.6)
Adj. PAT margin (%)	12.9	14.8	(191) bps	14.9	(198) bps
Ann. EPS (Rs)	22.1	18.9	16.5	22.9	(3.6)

Source: Company, India Infoline Research
 
Outlook and valuation

• Going ahead, we expect volume growth to remain strong for both PNG and CNG. CNG volumes will be driven by increasing private vehicle conversions (currently 5,000 vehicles/month), while PNG volumes will be propelled by higher penetration amongst households.
  
• We expect IGL to witness a revenue CAGR of 34% and a PAT CAGR of 18% during FY11-13E. We maintain our Market Performer rating and 9-month price target of Rs427. 

Valuation summary

Y/e 31 Mar (Rs m)	FY10	FY11	FY12E	FY13E
Revenues	10,781	17,505	24,433	31,411
yoy growth (%)	26.4	62.4	39.6	28.6
Operating profit	3,808	4,987	6,524	7,540
OPM (%)	35.3	28.5	26.7	24.0
Pre-exceptional PAT	2,155	2,598	3,152	3,596
Reported PAT	2,155	2,598	3,152	3,596
yoy growth (%)	24.9	20.5	21.3	14.1
EPS (Rs)	15.4	18.6	22.5	25.7
P/E (x)	25.8	21.4	17.6	15.5
Price/Book (x)	6.7	5.5	4.5	3.7
EV/EBITDA (x)	14.3	11.2	8.5	7.3
Debt/Equity (x)	0.0	0.2	0.6	0.5
RoE (%)	28.6	28.4	28.2	26.4
RoCE (%)	41.8	38.1	33.0	28.5

 

 

Buy IGL cmp 396Rs (buy between 388 to 397) Short term target 422Rs and Medium Term target 457Rs.

Thanks and Regards 
 
Rohit Saxena

Phone No: 09899365905
Mail Id: simmi9sep@gmail.com

Losers say it is hard and impossible, but winners say it is hard but not impossible."