IGL - Q3FY13 Result Update

Results below estimate due to lower volumes and margins

IGL’s net profit of Rs863mn was lower than our estimate of Rs923mn on account of marginal increase in realisations and higher increase in gas costs. Net revenue for the quarter increased marginally by 1.6% qoq to Rs8.7bn as volumes and realizations increased by 0.6% and 1% respectively. CNG volumes for the quarter were constant at 194mnkg (yoy +6.2%) while realizations increased by meager 0.4% qoq to Rs38.04/kg. PNG volumes and realisations for the quarter increased by 2.6% and 2.5% respectively. Gas costs for the quarter increased at a higher pace of 4.8% qoq to Rs16.88/scm. Consequently, IGL’s gross margin for the quarter declined by 5.7% qoq to Rs8.56/scm (yoy +12.7%). EBITDA/scm for the quarter stood at Rs5.44 (yoy +14.7% qoq -10.4%) which was lower than our estimate of Rs5.66/scm.

We increase our FY13e/FY14e earnings estimate by 18.7/ 15.1% to reflect our assumption of higher gross margin and lower volume growth. We maintain our BUY rating on the stock with a revised target price of Rs339. At the CMP, the stock is trading at 9.7x and 5.1x FY14e EPS and EBITDA respectively.