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ICICI Securities
Indraprastha Gas (Sell)
Target: ₹310
CMP: ₹410.95
Indraprastha Gas’ (IGL) Q1-FY21 standalone and consolidated EPS plunged 85-
86 per cent y-o-y hit by fall in volumes and margins due to lockdown. Q1 earnings fall was steeper than our estimate despite volume decline being less steep due to big disappointment on EBITDA margin.
Hit by lockdown, Q1-FY21 CNG volumes were down 66 per cent y-o-y and industrial & commercial volumes down 40 per cent y-o-y. Domestic PNG volumes were up 39 per cent y-o-y.
Q1-FY21 consolidated EPS plunged 86 per cent y-o-y as share of profit of associates crashed by 82 per cent y-o-y.
EBITDA margin contracted despite higher gross margin as lower volumes meant a surge in per-unit opex. To factor-in the disappointment in Q1 and continued lockdown, we cut FY21-FY22 EBITDA margin estimates by 22 to 7 per cent and volume estimates by 3 to 1 per cent, which has led to 22-7 per cent cut in FY21-FY22 EPS and 10 per cent cut in target price to ₹310/share (25 per cent
downside).
Margin decline may be earlier and steeper than estimated if competition is allowed and gas used for CNG is deregulated.
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