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  • Stock recommendation: Indraprastha Gas Ltd – SELL – TP Rs.257

    Publish date: August 13, 2018

    Result Update

    Despite higher gas sales volume and price hike undertaken IGL has reported flat PAT growth sequentially. Gross margin declined due to higher raw material cost. Weak rupee and elevated gas prices remains the key headwinds.

    Key Highlights

    • IGL's PAT is lower than our estimates. PAT stood at Rs.1.8 bn (vs our estimate of Rs.1.9 bn) up 1% qoq and 9% yoy thereby translating into quarterly EPS of Rs.2.5 and CEPS of Rs.3.2. IGL has 50% stake in CUGL and MNGL each. The combined profit is Rs.380 mn. (IGL Share is Rs.190 mn).
    • IGL bagged a licence to retail CNG and PNG to households in Meerut, Muzaffarnagar and Shamli districts of Uttar Pradesh.

    Valuation & Outlook

    • We expect IGL to book CNG gas volume of ~1112 mn Kgs and PNG volume of 527 mmscm in FY19E and CNG gas volume of ~1201 mn Kgs and PNG volume of 580 mmscm in FY20E. We expect an EPS of Rs.12.1 for FY19E and an EPS of Rs.14.1 for FY20E.
    • Based on our estimates, the stock at current market price is trading at 13.3x EV/EBIDTA and 21.3x P/E on FY20E earnings.
    • We believe that stock is expensively valued at current price and hence we maintain SELL rating on IGL with DCF based revised price target of Rs.257 (earlier Rs.235) reflecting price hike undertaken in Q1FY19.


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