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Our View

Indraprastha Gas Limited (IGL) reported a marginally better than expected Q1FY25 performance, with Rs5.8bn EBITDA being lower 9.4% YoY but up 11.3% QoQ. The Rs4bn PAT demonstrated 8.4% YoY de-growth but experienced a 4.9% QoQ increase. Despite meeting volume expectations, the realizations were better and lower than estimated opex lead to better EBITDA margins. With the stock trading expensive, we maintain our rating of REDUCE with an unchanged target price of Rs 500/share.

Result Highlights

* Performance: The Rs5.8bn EBITDA (above our and consensus estimates on higher EBITDA spreads) was down 9.4% YoY and up 11.3% QoQ, while the Rs4bn PAT was down 8.4% YoY and up 4.9% QoQ, higher than our estimates of Rs 3.3bn. Overall strong performance on higher than expected EBITDA spreads but volumes growth a big disappointment given that the management in last quarter concall had highlighted a number of close to 9mmscmd.

* Volumes at 8.63mmscmd was up 5.3% YoY but down 1.1% QoQ. CNG volumes were at 6.45mmscmd (our est. 6.53), up 4.6% YoY, 1.2% QoQ. D-PNG volumes were at 0.67mmscmd, up 16% YoY but down 6.8% QoQ. Industrial and commercial sales were 1.01mmscmd, up 5.6% YoY and down 11.2% QoQ. Haryana sale volumes were 0.50msmcmd, stable at peak levels.

* The gross margin was Rs13.2/scm, down 8% YoY and flat QoQ. The YoY decrease was due to price cuts and a decreased share of APM, also higher share of sourcing HP/HT and term which are more expensive versus APM.

* Opex, at Rs5.8/scm, was flat YoY and down 11.4% QoQ.

* The EBITDA spread, at Rs7.4/scm, was down 14% YoY, but up 12.6% QoQ (higher than our estimate of 6.1) supported by lower opex and marginally lower than estimated gas cost.

* The other income at Rs 727mn was up 59.2% YoY and down 33.6% QoQ.

* JV contribution. The contribution of CUGL and MNGL to Indraprastha’s PAT was Rs807.7mn in Q1, down 3.4% YoY from Rs835.9mn in Q1FY24 and down 0.9% QoQ.

Valuation

We expect an 7.4% volume CAGR over FY24-FY26 with a spread of Rs7.5–7.6/scm. Delhi is growing at 1-2% annually as the volumes have been impacted by decrease in DTC buses volumes. GautamBudh Nagar and Ghaziabad growing by 10-15% and areas outside these are growing in the range of 10-15% while seeing exponential growth on lower bases. EVs are planned to take the place of the retired DTC buses (which contributes ~18% to the volumes) and it would have a negative impact on IGL volumes.

The stock trades at 20.4x/18.7x FY25e/26e PER and at 16.9x/15.5x excluding investments in CUGL and MNGL. We maintain our rating of REDUCE, valuing the stock on a PER basis, assigning an 15x multiple at an unchanged target of Rs500 (incl. value from investments in MNGL, at Rs70/sh and, in CUGL, atRs22/sh).

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