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Motilal Oswal Report
Indraprastha Gas Ltd. reported a beat on our Ebitda estimate, driven by strong volumes (in line), which grew 48% YoY on a low base, and higher-than-estimated Ebitda margin/standard cubic meter, which grew 20% sequentially.
Total volumes grew 48% YoY and 2% QoQ to 7.9 million metric standard cubic meter per day, with a record high compressed natural gas volume of 5.9 mmscmd (up 63% YoY) and modest piped natural gas volumes of 1.9 mmscmd (down 6% QoQ).
Ebitda/scm stood at Rs 8.6 (our estimate: Rs 6.7).
With an overwhelming quarterly performance, the challenges ahead for IGL are overwhelming too:
As discussed in our earlier report city gas distributions will have to raise compressed natural gas prices by ~Rs 4/kg (excluding taxes) for every $1/metric million British thermal unit rise in gas prices to maintain margin around current levels.
That said, oil marketing companies are also seeking higher single-digit commissions for retailing CNG at their outlets, which will further challenge the sustainability of margin.
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