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Indraprastha Gas IGL

Indraprastha Gas - Key highlights:

IGL granted three year exclusivity period by PNGRB.
The Petroleum and Natural Gas Regulatory Board (PNGRB) has authorizedIndraprastha Gas to do city gas distribution operations in the National Capital Territory (NCT).
IGL is now authorized to retail CNG (compressed natural gas) to automobiles and piped gas to households in NCT. IGL has also got a three-year exclusivity period do business in the NCT, and no other company would be allowed to operate in the city in the duration. This is positive for IGL as finally PNGRB has softened its stance against IGL.
Awaiting authorization for Noida & Greater Noida.

Growing CNG and PNG markets.

Some of the triggers for the growing CNG markets are large scale conversion of petrol driven private vehicles, introduction of Radio Taxis and high capacity buses on CNG. Also there is increase of CNG variant models by car manufactures and introduction of 2-3 wheelers on CNG.
Piped Natural Gas (PNG) has become a preferred kitchen fuel to replace LPG cylinders. Also its usage in the commercial establishments like hotels, restaurants and hospitals is increasing on a regular basis.

IGL is expected to report revenues of Rs.9.5 bn (up 11.4%), EBIDTA margins of 36.0% (as against 37.4%) and PAT of Rs.1.9 bn (up 4.3%).Accordingly IGL to report EPS of Rs.13.5 and CEPS of Rs.19.4 in FY10E.

At Rs.100, the stock trades at 3.8x EV/EBIDTA, 1.7x book value, 7.4x earnings and 5.2x cash earnings based on FY10E. For a one-year forward rolling band analysis for IGL, currently the stock is trading below its traditional band of 8x- 14x one year forward earning estimates. ACCUMULATE IGL with a price target of Rs.130.