Company Update : Indraprastha Gas Ltd Ltd By Motilal Oswal Financial Services Ltd
Both adj. EBITDA margin and volume growth below estimates
* IGL’s adj. EBITDA margin of INR4.6/scm came in below our est. of INR5/scm. Volumes stood at 9.18mmscmd, slightly lower than our est. of 9.29mmscmd. While IGL’s realization increased sharply by ~INR3/scm QoQ primarily on account of INR1.14b in provision reversal, gas cost/opex rose by INR0.5/INR0.8 per scm QoQ, leading to ~INR1.7/scm QoQ growth in EBITDA/scm margin. However, EBITDA margin, adjusted for the provision reversal of INR1.14b, stood at INR4.6/scm (our est. INR5/scm).
* We note that spot LNG prices were elevated, averaging USD14/mmbtu in 4Q (flat QoQ). However, spot LNG prices have corrected in 1QFY26 so far, with the current price at ~USD12/mmbtu. On 25th Nov’24, IGL announced CNG price hikes of ~INR1.5 to INR4 per kg for ~30%-35% of the regions where IGL’s CNG business operates (i.e. excluding Delhi). Further, on 7th Arp’25, IGL increased the price by INR1/INR3 per kg in Delhi/other regions.
* In a recent press release, IGL stated that, as communicated by GAIL, its domestic gas allocations have been reduced by ~20%, effective from 16th Apr’25. This adjustment decreases its share of domestic gas in the CNG segment from 51% to 41%. However, the recent APM reduction has been compensated by 20% costlier New Well Gas.
* IGL currently trades at 15x FY26E SA P/E, while its 1Y fwd. LTA is 21.1x P/E. We have a Neutral rating on the stock.
* Total volumes were in line with our estimate at 9.18mmscmd (our est.: 9.29mmscmd) (+5% YoY).
* Both CNG and PNG volumes came in line with estimates.
* EBITDA/scm came in above our est. at INR6. However, adjusted EBITDA/scm came in at INR4.6 (our est. INR5).
* Realization increased by ~INR3/scm QoQ, while gas cost/opex rose by INR0.5/INR0.8 per scm QoQ.
* Increase in realization (~INR1.4scm) was on account of the reversal of provisions amounting to INR1.14b, based on negotiations with OMCs w.r.t trade margins.
* Resulting EBITDA stood 20% above our estimate at INR5b (-5% YoY).
* IGL’s PAT came in 18% above our est. at INR3.5b (-9% YoY).
* In FY25, IGL’s net sales grew 7% to INR149b, while EBITDA/PAT declined 17%/16% YoY to INR19.8b/INR14.7b.
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