Q1 EBITDA at Rs 3.6 bn is 7% above our estimate (2% below street) and PAT at Rs 2.2 bn is in line (3% above street). Beat is due to higher Ebitda margin from CNG price hike, low opex and favourable FX. Management is confident of >10% volume growth from policy support, rising CNG penetration/conversions and accelerated PNG connections in existing GAs. New GAs expected to contribute 0.5 mcmd each in 4-5 years’ time on average. Guided for FY20/21 capex of Rs 9-10 bn.
We tweak our volume growth, depreciation and interest cost estimates to reflect Q1 performance. Lower FY20/21e FX to Rs 69.7/71.1 (`72/74 earlier) and raise standalone estimates by 1-2%. Factor in higher contribution from CUGL/MNGL on continuing strong performance. Raise target price to Rs 340 (Rs 330 earlier). We see ~15% earnings CAGR over FY19-22e supported by volume growth, operating leverage, strong execution and supportive gas prices. ADD.
Operational highlights from the quarter
o Gross margin increased 6% y-o-y/2% q-o-q to `11.5/scm; opex increased 5% y-o-y/-4% q-o-q to `5.2/scm leading to Ebitda margin rise of 8% y-o-y/7% q-o-q to `6.3/scm, the highest in 11 quarters.
o CNG volumes up 13% y-o-y/2% q-o-q to 424 mcm. PNG volumes rose 12% y-o-y/-3% q-o-q to 145 mcm.
o IGL earlier guided for 60-70 CNG station additions in FY20 (vs. 54 in FY19). It added 7 stations in Q1 with the pace expected to accelerate in coming quarters.