By: ICN Bureau
Last updated : June 28, 2021 8:01 am
Q4FY21 standalone EPS was up 31% YoY driven by 21% YoY surge in EBITDA margin to Rs8.0/scm
Indraprastha Gas' (IGL) Q4FY21 standalone EPS was up 31% YoY driven by margin rise due to price hikes in CNG and PNG; volumes were up QoQ and YoY. FY21 standalone recurring EPS was down 6% YoY despite 18% YoY rise in margin, hit by 17% YoY volume fall. Consolidated Q4 EPS rise was less steep than standalone at 29% due to 9% YoY fall in share of profit of associates. Factoring in the impact on Q1 volumes due to lockdown has meant cut in FY22E volume estimate by 4%. This has led to cut in FY22E EPS by 4% and target price by 5% to Rs472 (8% downside).
Q4FY21 EPS up 31% YoY on margin and volume rise: Q4FY21 standalone EPS was up 31% YoY driven by 21% YoY surge in EBITDA margin to Rs8.0/scm (down 8% QoQ) and 9% YoY and QoQ rise in volumes. The surge in EBITDA margin was due to gas cost fall by Rs2.9/scm YoY being steeper than realisation fall of Rs2.0/scm YoY; opex was down Rs0.4/scm YoY. CNG volumes were up 7% YoY (6% QoQ), industrial/commercial volumes were up 19% YoY (6% QoQ) and domestic PNG volumes were up 10% YoY and QoQ.
Cut FY22E EPS and target price: Second wave of covid, which led to lockdowns in Q1FY22 in Delhi, are likely to hit Q1FY22E volumes. Volume fall may hit margin but full benefit of CNG and residential PNG price made on 2-Mar'21 despite no rise in domestic gas cost, would support margins. We have cut our FY22E volume estimate by 4% to factor in the impact of the lockdown in Q1 but kept our margin estimate unchanged at Rs8/scm; FY23-FY24E margin is assumed flat at Rs8/scm vs Rs5.9-7.6/scm in FY18-FY21. The cut in volumes meant a cut in FY22E EPS by 4% and target price by 5% to Rs472 (8% downside).
Lofty margins assumed to continue; risks not ruled out: We assume lofty margins will continue as the regulation allowing competition will take time to implement and may fail to have any significant impact as, in its present form and interpretation, it limits OMCs' ability to compete. However, downside risk to FY22E margin may come from the inability to fully pass on the rise in spot LNG, oil linked LNG (RasGas LNG) and APM gas price (estimated to rise ~60% QoQ in H2FY22E); JKM spot LNG has more from doubled from lows in Mar'21 while RasGas LNG price is also set to rise sharply in line with oil price. Not being able to fully pass on possible 90-100% (Rs3.3-4.0/kg) hike in commissions to OMCs on CNG may also hit margins; clarity is likely on this issue in 4-6 months.