Emkay Global Financial Services has maintained `Accumulate` on Indraprastha Gas with a price target of Rs 401 as against the current market price (CMP) of Rs 336 in its report dated Jan. 24, 2012. The broking house gave the following rationale:
Highlights of the results:
IGL reported results which were below our estimates at bottom line. Revenue for the quarter was at Rs6.6.billion, growth of 45.1% YoY, mainly on account of higher volume
growth with better realization in both CNG segment. EBITDA during the quarter was at Rs. 1.5billion, growth of 16.4% YoY. EBIDTA margin has declined by 559.6bps to 22.7%, mainly on account of higher cost of raw material. Interest cost increased by 15% sequentially to Rs 0.13 billion, mainly on raising loans in the previous quarter for funding its capex plans in NCR region. During the quarter company reported net profit of Rs 0.69 billion, growth of 2.9% on YoY basis.
CNG volumes and realisation/kg increased by 16.1% and 15.5% respectively, YoY:
During the quarter CNG volumes has increased by 16.1% to 179.8 million kgs. CNG realisation stood at Rs 31.7/kg, growth of 15.5% YoY, on account of revision in the selling price of CNG during the Quarter (Rs 2//Kg on 1st Oct 2011). After the recent hike of Rs 1.75/kg, currently CNG prices stands at 33.75/kg in Delhi and Rs 37.90/Kg in Noida, Greater Noida and Ghaziabad.
PNG volumes and realisation/scm increased by 64% and 18.9% YoY respectively:
During the quarter PNG volumes has increased by 64% to 71.1mmscm mainly due to increased offtake by commercial and industrial customers and addition of new domestic connection to some extant. PNG realization stood at Rs.23.1/scm as against Rs 19.4/scm, growth of 18.9% YoY.
EBIDTA margin declined by 375bps QoQ to 22.7% led by higher input cost:
Three major reason behind squeeze in EBIDTA margin a) Rupee depreciated by 11% to 50.8 during the quarter b) higher cost of LNG at USD14-16/mmbtu and c) stoppage of KG D6 supply from mid December 2011.
We have tweaked/adjusted our estimates for FY12E & FY13E based on the recent price hike by the company and higher input cost assumption.
Outlook and Valuations:
Dec`11 Qtr results were broadly inline with market expectations. Our EPS estimate of Rs 21.6 and Rs 23.9 for FY12E and FY13E respectively, imply earning CAGR of 14% over FY11-13E. However the recent news on proposed cap on gas marketing margin which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges. Currently, stock trades at 13.9x FY13E EPS and 3.3x P/BV, we maintain Accumulate ratings with the revised target price of Rs 401.
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