Buy Indraprastha Gas; target of Rs 161: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Resilient volume growth: Total sales volumes increased 4.2%/8.0% QoQ/YoY to 10.1mmscmd, driven by 4.9%/8.7% QoQ/YoY growth in CNG sales volumes and 1.9%/6.0% QoQ/YoY growth in PNG volumes.
  • Higher input gas costs: EBITDA/scm declined to a loss of INR-0.3/scm due to a 22.0%/47.9% QoQ/YoY increase in gas costs, with spot LNG procurement increasing to 15% of the sourcing mix.
  • Long-term EBITDA/scm guidance: Management maintained its guidance of INR6-7/scm, assuming an easing of geopolitical tensions.
  • Volume growth and margin expansion: The company expects double-digit volume growth and margin expansion, driven by an increase in HPHT gas allocation and a reduction in spot LNG procurement.

Thesis Validation Checklist

  • Volume growth: Watch for continued resilient volume growth, with a focus on CNG and PNG sales volumes.
  • Input gas costs: Monitor the trend in input gas costs and the company's ability to manage them.
  • EBITDA/scm: Track the recovery in EBITDA/scm, driven by an easing of geopolitical tensions and an increase in HPHT gas allocation.
  • HPHT gas allocation: Monitor the progress in HPHT gas allocation, which is expected to increase progressively and reduce the company's reliance on spot LNG procurement.