IGL has posted solid numbers for Q4 and FY07.
FY07
- Revenues up by 17.9%
- Operating Profit up by 21.17%
- Net Profit up by 30%
- ROE has improved from 28% to 29.5%
Positives
1. Conversion of private cars at about 2500-3000 per month.
2. Expansion in Noida, Faridabad, Panipat and Sonepat.
3. Commonwealth games in 2010 to provide a big boost.
4. Number of PNG connections to double by FY08 from 70,000.
5. Zero debt company and all capex for expansion to be met through internal accruals.
Negatives:
1. Net Profit margins are at 20% because IGL gets gas at subsidized rates. Any changes to the pricing mechanism will impact the bottomline. Gujurat Gas has NP margins of about 11%.
2. IGL currently has a monopoly in the NCR region and even though IGL has a headstart, any regulatory changes by the Govt. can be a concern.
Bottomline:
At current valuations, IGL can easily be a stock that doubles in the next 3 years(CAGR 25%). Any PE rerating will provide an additional boost. The downside risk also seems to be minimal.
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