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Indraprastha Gas share price has gone up by 5 times in last 5 years, generating good returns for investors. From a price of around Rs. 90-95 levels in Nov 2015, Indraprastha Gas share price is currently trading at around Rs. 490 levels. With this many investors have common questions across their minds.
Is there more upside left in Indraprastha Gas share price?
Is Indraprastha Gas a multibagger stock?
To know the answers to the above questions, let’s take a detailed look at the strengths and weakness of Indraprastha Gas Limited (IGL) with a fundamental perspective.
Incorporated in the year 1998, IGL is engaged in the business of supplying natural gas to transport, domestic, commercial and industrial consumers.
With the backing of strong promoters – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) – IGL is a provider of natural gas in Delhi and adjoining areas such as Noida, Greater Noida, Ghaziabad, etc. It also operates in UP and Pune through subsidiaries
Indraprastha Gas Limited is one of the best players in the City Gas Distribution (CGD) industry
|
Key metrics |
Indraprastha Gas |
Mahanagar Gas |
Gujarat Gas |
|
Market Cap (Rs bn) |
276 |
94 |
224 |
|
TTM PE |
27 |
14 |
22 |
|
|
Infrastructure | ||
|
Pipeline (kms) |
13,951 |
5,631 |
24,000 |
|
CNG stations |
555 |
256 |
369 |
|
OMC owned stations (%) |
57% |
71% |
N.A. |
|
|
Consumer details | ||
|
CNG vehicles |
11,21,000 |
7,51,000 |
N.A. |
|
PNG-Domestic connections |
13,81,440 |
12,60,000 |
14,50,000 |
|
Industrial & Commercial customers |
6,800 |
4,021 |
3,500 |
|
|
Volume details | ||
|
FY20 CNG volume (mmscmd) |
4.8 |
2.2 |
1.5 |
|
FY20 PNG volume (mmscmd) |
1.7 |
0.8 |
7.9 |
|
CNG per station (scm per day) |
8,555 |
8,394 |
4,038 |
|
EBITDA/scm-FY20 |
6.5 |
9.8 |
4.8 |
|
Total cost/scm-FY20 |
21.1 |
17.8 |
25.2 |
|
|
Financial Performance- 5Y CAGR | ||
|
Volume |
11% |
4% |
8% |
|
Sales |
12% |
7% |
3% |
|
PAT |
21% |
21% |
22% |
|
OCF |
20% |
18% |
5% |
|
ROCE- 5Y Avg |
31% |
35% |
18% |
Future Outlook
To meet the increasing demand of CNG arising out of growing number of CNG vehicles in Delhi, the company is regularly upgrading its infrastructure.
Delhi Government’s directive making it mandatory for all LCVs operating in Delhi to run on CNG and launch of CNG variants by major car manufacturers are some of the major growth drivers the growth drivers for increase in demand of CNG.
Key strengths of Indraprastha Gas
Strong historical performance
Healthy balance sheet and fundamentals
Fastest growing player
Well placed compared to peers
Known for innovation in the industry
Indraprastha Gas Limited is a debt-free company
Huge cash reserves of Rs. 22 billion
Key risks which may impact Indraprastha Gas share price in future
Regulatory and policy risk- The Petroleum and Natural Gas Regulatory Board (PNGRB) is working on draft regulations to introduce 20% open access in areas that have already technically seen their marketing exclusivity end, yet to be formalized. This can lead to pressure on margins as well as loss of market share. Such changes in regulations will have an adverse impact on the company’s operations.
Introduction of market-linked gas pricing in future will lead to volatility in input costs. Any increase in gas costs will be passed on to the consumers will lower its competitiveness against other fuels such as petrol, diesel as well as LPG.
Delay in capex in new geographical areas will impact the volume growth of the company.
Entry and growth of Electric vehicles (EVs) is a significant threat in the long term. While mass adoption of EVs in India may still take another 10 or more years, as and when it becomes a reality it will directly compete with CNG for a share in the fuel mix.
In today\’s constantly changing world, the phenomenal past performance of Indraprastha Gas share prices may not necessarily be indicative of future performance. Despite being a fundamentally sound company, there are some key challenges too as we have seen above which may adversely impact Indraprastha Gas share prices in future. Hence it is very important to invest wisely after proper research.
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