Enam maintains sector outperformer rating on Indraprastha Gas
Strong growth in the conversion of private vehicles to CNG and rapid expansion of PNG network led to a rise in volumes.
Indraprastha Gas
Research: Enam Securities
Rating: Outperformer
CMP: Rs 115
Enam Securities maintains sector outperformer rating on Indraprastha Gas. IGL reported net sales of Rs 187 crore, up 14% y-o-y, and PAT of Rs 48.2 crore, up 20% y-o-y. For the full year, a jump in CNG and PNG volumes helped IGL post an impressive 27% increase in PAT (Rs 174 crore for FY08, against Rs 138 crore for FY07).
Strong growth in the conversion of private vehicles to CNG and rapid expansion of PNG network led to a rise in volumes. Full-year sales for CNG and PNG were 386.2 million kg (vs 344 million kg in FY07) and 42.9 mmscm (vs 36.6 mmscm in FY07), respectively.
High crude prices, fresh supply coming in from Reliance Industries��� Krishna Godavari D6 gas in H2 FY09, and favourable economics that gas offers over oil, can lead to acceleration in CNG/PNG demand. The Delhi government plans to enhance transport infrastructure in view of the Commonwealth Games in ���10. IGL will benefit from high volume growth with the introduction of radio taxis and high capacity buses on CNG.
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IGL currently supplies ~1.6 mmscmd of gas and has allocation for 2.2 mmscmd. It has applied for an additional 0.4 mmscmd for supply to other areas in the NCR. In Enam���s view, the market is largely ignoring IGL���s business franchise and its ability to manage costs, and seems to be more concerned about the impact of regulations. But at current valuations (9.1x FY09E EPS), the concerns seem to be overdone, and the stock offers a great investment opportunity.
Disclaimer: Investor's Guide does not accept responsibility for consequences of financial decisions taken by readers on the basis of information provided herein. The aim is to provide a reasonably accurate picture of financial and related opportunities based on information available with us.
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