indraprastha gas, 1q fy 2014

7/27/2019 Indraprastha Gas, 1Q FY 2014

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Please refer to important disclosures at the end of this report 1

Quarterly Performance (Standalone)Y/E March (` cr) 1QFY2014 1QFY2013 % chg (yoy) 4QFY2013 % chg (qoq)Net sales 903 760 18.7 882 2.3EBITDA 194 179 8.2 186 4.2

EBITDA margin (%) 21.5 23.6 (209)bp 21.1 39bp

PAT 88 85 3.6 84 3.9Source: Company, Angel Research

Indraprastha Gas (IGL)s 1QFY2014 top-line grew by 18.7% yoy. However,

EBITDA and PAT grew by only 8.2% yoy and 3.6% yoy on account of higher RLNG

costs and taxes. We maintain our Neutral recommendation on the stock.Top-line growth driven by both volume and realizations: The companys net salesgrew by 18.7% yoy to `903cr, mainly driven by increases in both, sales volumes

as well as realization. CNG and PNG volumes increased by 4.4% and 7.5% yoy

to 191mn kg and 86mmscm, respectively. Average CNG realization increased

12.5% yoy to `39.5/kg, whereas average PNG realization increased by 12.8%

yoy to `28.2/scm.

OPM contracts on cost pressures: Cost of goods sold increased by 21.6% yoy to`596cr, mainly on account of higher RLNG costs. Hence, despite higher growth in

net sales, the EBITDA grew by only 8.2% yoy to`

194cr in 1QFY2014. The EBITDAmargin slipped 209bp yoy to 21.5% in 1QFY2014. Further, higher depreciation

expenses (+24.4% yoy) and higher tax outgo led to the net profit growing by only

3.6% yoy to `88cr.

Outlook and valuation: IGL has frequently raised prices of CNG and PNG.However, as the proportion of costly gas is expected to increase, we expect the

companys margin growth to remain muted in the years ahead. Further, the

recent proposal to cap gas marketing margin by PNGRB remains an overhang on

the stock. On the valuation front, at the current level, the stock is trading at 10.3x

and 9.9x FY2014E and FY2015E earnings, respectively. We maintain our Neutralrating on the stock.Key financials (Standalone)

Y/E March (` cr) FY2012 FY2013E FY2014E FY2015ENet sales 2,519 3,365 3,656 4,456% chg 44.2 33.6 8.7 21.9

Net profit 306 354 360 375% chg 18.0 15.5 1.7 4.2

OPM (%) 25.2 22.5 21.5 18.6

EPS (`) 21.9 25.3 25.7 26.8P/E (x) 12.2 10.5 10.3 9.9

P/BV (x) 3.0 2.5 2.1 1.8

RoE (%) 27.5 26.0 22.1 19.6

RoCE (%) 31.4 31.4 27.6 26.5

EV/Sales (x) 1.6 1.1 1.0 0.8

EV/EBITDA (x) 6.3 5.1 4.8 4.5

Source: Company, Angel Research: Note CMP as of 12th August 2013

NEUTRALCMP `266

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (`cr) 156

Bloomberg Code

Shareholding Pattern (%)

Promoters 45.0

MF / Banks / Indian Fls 14.9

FII / NRIs / OCBs 19.6

Indian Public / Others 20.5

Abs. (%) 3m 1yr 3yr

Sensex (5.8) 7.9 4.8

IGL (10.8) 5.6 (12.6)

10

18,947

5,612

IGAS.BO

IGL@IN

3,723

0.6

329/238

117,514

Oil & Gas

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Bhavesh ChauhanTel: 022 3935 7800 Ext: 6821

[email protected]

Vinay RachhTel: 022- 39357600 Ext: 6841

[email protected]

Indraprastha GasPerformance Highlights

1QFY2014 Result Update | Oil & Gas

August 13, 2013


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Indraprastha Gas | 1QFY2014 Result Update

August 13, 2013 2

Exhibit 1:1QFY2014 performance (Standalone)

Y/E March (` cr) 1QFY2014 1QFY2013 % chg (yoy) 4QFY2013 % chg (qoq) FY2013 FY2012 % chg (yoy)Total Operating Income 903 760 18.7 882 2.3 3,365 2,519 33.6COGS 596 490 21.6 585 1.8 2,197 1,539 42.7Total operating expenditure 709 581 22.0 696 1.8 412 345 19.4

EBITDA 194 179 8.2 186 4.2 758 641 18.2EBITDA Margin (%) 21.5 23.6 21.1 22.5 25.5

Other Income 4 3 21.3 3 22.1 13 7 91.6

Depreciation 53 43 24.4 49 8.8 187 143 30.3

Interest 13 16 (17.5) 13 2.4 56 48 17.4

PBT 132 124 6.1 128 3.0 528 450 17.3PBT Margin (%) 14.6 16.3 14.5 15.7 17.9

Total Tax 44 40 11.6 44 1.4 174 144 21.2

% of PBT 33.5 31.9 34.1 33.0 31.9

PAT 88 85 3.6 84 3.9 354 306 15.5PAT Margin (%) 9.7 11.1 9.6 10.5 12.2

Source: Company, Angel Research

Net sales up 18.7% yoy: The companys net sales grew by 18.7% yoy to `903cr,mainly driven by increases in both, sales volumes as well as realization. CNG and

PNG volumes increased by 4.4% and 7.5% yoy to 191mn kg and 86mmscm,

respectively.

Average CNG realization increased 12.5% yoy to `39.5/kg, whereas average

PNG realization increased by 12.8% yoy to `28.2/scm.

Exhibit 2:CNG volumes stood at 191mn kg


Exhibit 3:PNG volume stood at 86mmscm


180 180

183

194 194

187

191

-

5

10

15

20

25

30

35

40

45

170

175

180

185

190

195

200

3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

(`perkg)

(mnkg)

CNG volumes Gross realization-RHS

7178 80

81 8488 86

0

5

10

15

20

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30

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(`perscm)

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PNG volumes Gross realization-RHS


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August 13, 2013 3

Exhibit 4:Net sales grew by 18.7% yoy


OPM contracts to 21.5%: The cost of goods sold increased by 21.6% yoy to`596cr, mainly on account of higher RLNG costs. Hence, despite higher growth in

net sales, the EBITDA grew only by 8.2% yoy to `194cr in 1QFY2014. The EBITDA

margin slipped 209bp yoy to 21.5% in 1QFY2014. Further, depreciation expenses

increased 24.4% yoy to `53cr in 1QFY2014 and tax rate also increased to

33.5% compared to 31.9% in 1QFY2013. Hence, net profit grew by only

3.6% yoy to `88cr.

Exhibit 5:Operating performance trend


Exhibit 6:PAT growth trend


663

720760 855 869 882

903

-

5.0

10.0

15.0

20.0

25.0

30.0

35.040.0

45.0

50.0

-

100

200

300

400

500

600

700800

900

1,000


(%)

(`cr)

Net sales Net sales growth (RHS)

22.7

23.7 23.6 24.2

21.721.1 21.5

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

-

50

100

150

200

250


(%)

(`cr)

Operating Profit Operating Margins (RHS)

2.9

18.9

5.7

28.526.0

2.6 3.6

-

5.0

10.0

15.0

20.0

25.0

30.0

-

20

40

60

80

100

120


(%)

(`cr)

PAT PAT growth (RHS)


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August 13, 2013 4

Investment arguments

Volume growth to continue: IGL has exhibited strong volume growth over the pastfew years. We expect the trend to continue going ahead, given that penetration of

CNG vehicles in Delhi is still at lower levels and the launch of newer

CNG-variant cars by automotive companies could keep conversions in the high

growth orbit. The PNG segment is also expected to continue its robust performance

on account of lower penetration in NCR while demand remains high. The

company continues to focus on the fast-growing PNG segment.

Regulatory overhang to persist:After the verdict of Delhi HC, the companysmarketing margin remains outside the purview of PNGRB. However, PNGRB has

indicated that it aims to regulate the marketing margins charged by the utilities.

This could potentially impact IGLs margins adversely in case there is a cap on

network tariff and/or marketing margin.

Outlook and valuation

IGL has frequently raised prices of CNG and PNG. However, as the proportion of

costly gas is expected to increase, we expect the companys margin growth to

remain muted in the years ahead. Further, the recent proposal to cap gas

marketing margin by PNGRB remains an overhang on the stock. On the valuation

front, at the current level, the stock is trading at 10.3x and 9.9x FY2014E and

FY2015E earnings, respectively. We maintain our Neutral rating on the stock.Exhibit 7:Key assumptions

Particulars FY2014E FY2015ECNG volumes (mmscm) 1,023 1,091

PNG volumes (mmscm) 434 542


Exhibit 8:Angel EPS forecast vs Consensus

Year Angel Bloomberg consensus VariationFY2014E 25.7 26.1 (1.5)FY2015E 26.8 27.7 (3.2)

Source: Company, Angel ResearchExhibit 9: Recommendation summary

Company CMP TP Reco. Mcap Upside P/E (x) P/BV (x) EV/EBITDA (x) RoE (%) RoCE (%)(`) (`) (` cr) (%) FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15EIGL 266 - Neutral 3,723 - 10.3 9.9 2.1 1.8 4.8 4.5 22.1 19.6 27.6 26.5

GSPL 53 68 Buy 3,002 28 5.3 4.7 0.8 0.7 2.2 1.7 17.3 16.8 19.1 19.1

Guj. Gas 226 - Neutral 2,808 - 10.0 9.8 2.7 2.4 5.7 4.9 28.2 25.6 25.0 23.3

Source: Angel Research


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August 13, 2013 5

Exhibit 10: One-year forward P/E

Source: Bloomberg, Angel ResearchCompany background

Incorporated in 1998, IGL is in the retail gas distribution business of supplying

CNG to transport sector, and PNG to domestic, industrial and commercial sectors

in Delhi and NCR. IGL started its operations in NCT of Delhi in 1999 with only 9

CNG stations and 1000 PNG consumers. Currently, IGL has 280 CNG stations,

310,000 residential consumers, and 730 industrial customers.

0

100

200

300

400

500

600

Nov-0

8

Feb-0

9

May-0

9

Aug-0

9

Nov-0

9

Feb-1

0

May-1

0

Aug-1

0

Nov-1

0

Feb-1

1

May-1

1

Aug-1

1

Nov-1

1

Feb-1

2

May-1

2

Aug-1

2

Nov-1

2

Feb-1

3

May-1

3

Aug-1

3

Shareprice(`)

7x 10x 13x 16x 19x


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August 13, 2013 6

Profit & Loss Statement (Standalone)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ENet Sales 1,078 1,746 2,519 3,365 3,656 4,456

Other operating income - - - - - -Total operating income 1,078 1,746 2,519 3,365 3,656 4,456% chg 26.4 62.0 44.2 33.6 8.7 21.9

Total Expenditure 697 1,252 1,884 2,609 2,870 3,629

Purchase of gas 495 984 1,539 2,197 2,439 3,128

Staff expenditure 31 38 44 57 70 81

Other operating expenditure 172 230 301 355 361 420

EBITDA 381 494 635 756 786 827% chg 26.9 29.8 28.4 19.1 4.1 5.2

(% of Net Sales) 35.3 28.3 25.2 22.5 21.5 18.6

Depreciation and amort. 77 103 143 187 218 250

EBIT 303 391 491 569 568 578% chg 30.4 29.0 25.5 15.8 (0.2) 1.7

(% of Net Sales) 28.1 22.4 19.5 16.9 15.5 13.0

Interest & other Charges - 13 48 56 48 35

Other Income 21 7 7 13 17 18

(% of PBT) 6.5 1.9 1.5 2.4 3.2 3.2

Share in profit of Associates - (1.0) - - - -

Recurring PBT 324 386 450 526 537 560% chg 25.3 18.9 16.7 16.8 2.2 4.2

Extraordinary Expense/(Inc.) - (1) - - - -

PBT (reported) 324 387 450 526 537 560Tax 109 126 144 174 177 185

(% of PBT) 33.6 32.6 31.9 33.1 33.0 33.0

PAT (reported) 215 260 306 354 360 375Add: Share of earnings of asso. - - - - - -

Less: Minority interest (MI) - - - - - -

Prior period items - - - - - -

PAT after MI (reported) 215 260 306 354 360 375ADJ. PAT 215 260 306 354 360 375% chg 24.9 20.5 18.0 15.5 1.7 4.2

(% of Net Sales) 20.0 14.9 12.2 10.5 9.8 8.4Basic EPS (`) 15.4 18.6 21.9 25.3 25.7 26.8Fully Diluted EPS ( ) 15.4 18.6 21.9 25.3 25.7 26.8% chg 24.9 20.5 18.0 15.5 1.7 4.2

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

previous year numbers


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August 13, 2013 7

Balance Sheet (Standalone)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ESOURCES OF FUNDSEquity Share Capital 140 140 140 140 140 140Preference Capital - - - - - -

Reserves& Surplus 685 863 1,088 1,353 1,629 1,920

Shareholders Funds 825 1,003 1,228 1,493 1,769 2,060Minority Interest - - - - - -

Total Loans 55 282 389 349 320 30

Other Long term liabilities - 117 - - - -

Long term Provisions - 4 5 8 8 8

Net Deferred Tax Liability 24 41 63 84 84 84

Total Liabilities 904 1,447 1,685 1,934 2,181 2,182APPLICATION OF FUNDSGross Block 1,105 1,716 2,266 2,719 3,119 3,569

Less: Acc. Depreciation 454 557 688 872 1,090 1,340

Net Block 651 1,159 1,579 1,847 2,029 2,229Capital Work-in-Progress 183 327 375 291 300 200

Goodwill - - - - - -

Investments 17 42 98 143 143 143Long term loans and adv. - 39 5 6 6 6

Current Assets 257 199 264 341 423 391

Cash 121 17 32 51 149 80

Loans & Advances 69 57 56 60 60 60

Other 67 124 177 230 215 250

Current liabilities 204 319 637 693 719 786

Net Current Assets 53 (120) (372) (352) (296) (395)Mis. Exp. not written off - - - - - -

Total Assets 904 1,447 1,685 1,934 2,181 2,182




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August 13, 2013 8

Cash Flow Statement (Standalone)Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EProfit before tax 324 386 450 528 537 560

Depreciation 77 103 143 187 218 250Dep. accepted during the year 29 62 107 (40) (29) (290)

Change in Working Capital 25 (9) 69 145 103 334

Less: Other income (21) (6) (7) (13) (17) (18)

Direct taxes paid (106) (114) (150) (163) (162) (162)

Cash Flow from Operations 328 421 612 643 650 673(Inc.)/ Dec. in Fixed Assets (389) (771) (599) (368) (409) (350)

(Inc.)/ Dec. in Investments 87 - - - - -

Other income 21 (6) 7 13 17 18

Cash Flow from Investing (281) (748) (606) (362) (391) (332)Issue of Equity - - - - - -

Inc./(Dec.) in loans - 345 107 (40) (29) (290)

Dividend Paid (Incl. Tax) (73) (73) (70) (77) (84) (84)

Others 1 - (131) 8 - -

Cash Flow from Financing (72) 262 65 (218) (77) (325)Inc./(Dec.) in Cash (25) (79) 71 63 182 16

Opening Cash balances 146 138 59 130 194 375Closing Cash balances 138 59 130 194 375 391




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August 13, 2013 9

Key Ratios

Y/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 17.3 14.3 12.2 10.5 10.3 9.9P/CEPS 12.7 10.3 8.3 6.9 6.4 6.0

P/BV 4.5 3.7 3.0 2.5 2.1 1.8

Dividend yield (%) 1.9 1.9 1.9 2.1 2.3 2.3

EV/Sales 3.4 2.3 1.6 1.1 1.0 0.8

EV/EBITDA 9.6 8.0 6.3 5.1 4.8 4.5

EV/Total Assets 4.0 2.7 2.4 2.0 1.7 1.7

Per Share Data (`)EPS (Basic) 15.4 18.6 21.9 25.3 25.7 26.8

EPS (fully diluted) 15.4 18.6 21.9 25.3 25.7 26.8

Cash EPS 20.9 25.9 32.1 38.6 41.3 44.7

DPS 5.0 5.0 5.0 5.5 6.0 6.0

Book Value 59.0 71.7 87.7 106.6 126.4 147.2

Dupont Analysis (%)EBIT margin 28.1 22.4 19.5 16.9 15.5 13.0

Tax retention ratio 66.4 67.3 67.0 67.0 67.0 67.0

Asset turnover (x) 1.8 1.6 1.7 2.0 2.0 2.3

ROIC (Post-tax) 33.5 24.7 22.4 23.1 21.0 20.1

Operating ROE 33.5 24.7 22.4 23.1 21.0 20.1

Returns (%)ROCE (Pre-tax) 38.1 33.6 31.4 31.4 27.6 26.5

Angel ROIC (Pre-tax) 64.7 48.3 43.9 43.3 37.4 34.5

ROE 28.6 28.4 27.5 26.0 22.1 19.6

Turnover ratios (x)Asset Turnover (Gross Block) 1.1 1.2 1.3 1.3 1.3 1.3

Inventory / Sales (days) 9 7 5 4 5 6

Receivables (days) 11 11 15 17 16 12

Payables (days) 56 53 77 81 78 67

WC cycle (ex-cash) (days) (18) (21) (39) (44) (42) (38)

Solvency ratios (x)Net debt to equity (0.1) 0.2 0.2 0.1 0.0 (0.1)

Net debt to EBITDA (0.2) 0.5 0.4 0.2 0.0 (0.2)Interest Coverage (EBIT/Int.) - 29.7 10.3 10.1 11.8 16.5

Note: Some of the figures from FY2011 onwards are reclassified; hence some ratios may not be

comparable with previous year ratios


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August 13, 2013 10

Disclosure of Interest Statement IGL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine

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indraprastha gas, 1q fy 2014

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