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Equirus Securities
Indraprastha Gas (Add)
CMP: ₹344.55
Target: ₹360
Key takeaways: a) Fourth quarter (2019) CNG volumes grew 15 per cent y-o-y (best quarterly growth since FY13) to 4.6 mmscmd driven by private vehicle conversions, demand from LCVs (ban on trucks passing though Delhi) and rising differential between diesel/petrol and CNG prices. We expect about 12 per cent CNG volume CAGR over FY19-FY21E driven by a pick-up in DTC bus volumes, private vehicle conversions and Gurgaon and Rewari volumes flowing in. Volume acceleration in Gurgaon will happen in 2HFY20 with CNG stations ramping up and connectivity provided to industrial hubs & households.
b) Post some softness in 3QFY19, PNG volume growth returned from early double-digits in the last two quarters to 20 per cent y-o-y in 4QFY19; this was led by a 30 per cent/13 per cent y-o-y growth in industrial/household activities and further aided by a 12.5 per cent y-o-y growth in trading volumes. We expect 12 per cent PNG volume CAGR over FY19-FY21E driven by strong growth in industrial volumes.
We expect EBITDA/EPS CAGR of 12 per cent/14 per cent over FY19-FY21E driven by a 12 per cent volume CAGR. Maintain ‘add’ with a DCF based September 2020 target price of ₹360 (March 2020 target price of ₹340 earlier), including ₹37/share for the subsidiary stake.
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