Hi Alchemist ,

Please let me know about Indraprastha Gas.

Is it a good buy at current levels Rs 131?

thanks,

sid

Guys,

What is your take on Indraprastha Gas?

- On long term graph 50 EMA is curving nicely down.

- 104 is 61.8% retracement.

On upside it has resistance at red dotted line - 200 EMA and 50 EMA Yellow Solid line - 50 EMA.

Breakout from trading range should give clear destination upside 164 or lower side 91.

Guys what do you think about Indraprastha Gas?

The management seems pretty confident about achieving 25% growth over the next 4-5 years.

Expect margins to be stable at current levels: IGL - CNBC-TV18 -

It's a zero debt country.

Demand for its products is pretty good too.

Once a person starts using PNG/CNG, he is unlikely to go back to LPG/diesel/petrol.

(A small portion of the users to revert back to diesel/petrol).

Only risk that I see in this stock is the risk of regulation:

Cannot rule out 30%-40% correction in gas T&D companies: Kotak - Moneylife Personal Finance site and magazine

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Note:

I found a report on Indraprastha Gas by Citi, dated 30th June 2011.

Citi's estimates for PAT growth for FY 2012, FY 2013 and FY 2014 are 30%, 5% and 14% respectively. That's CAGR of 15.5% over the next 3 years.

Is the management overoptimistic?

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IGL is a monopoly in the NCR region (Delhi,Noida,Greater Noida and Ghaziabad).

Ghaziabad license is under a cloud due to litigation with the Petroleum and Natural Gas Regulatory Board(PNGRB),the Supreme Court decision on the same is pending.

IGL gets Ghaziabad city-gas license.

PNGRB has no power to grant city gas licences: HC.

IGL has marketing exclusivity in PNG till January 2012,and network exclusivity (will get a fixed charge for lending its network infrastructure) till 2025. Currently IGL network covers 75% of Delhi and planning to cover the remaining 25% before the end of the year.

The company has also bid for Ludhiana and Jalandhar licenses for city gas distribution,and if they get the approvals then this would entail significant investment and lead to some debt.

Management expects to do a billion dollars of sales by 2015-16.

FY11 EPS was 18.55 and the stock is trading at 21 times trailing earnings.

Let's examine 4 scenarios over the next 3 years:

1.FY14 EPS at a CAGR of 12%:26.05 per share.

a.Stock price at 12 PE:312.60

b.Stock price at 20 PE:521.

2.FY14 EPS at a CAGR of 15%:28.20 per share.

a.Stock price at 12 PE:338.4

b.Stock price at 20 PE:564.

3.FY14 EPS at a CAGR of 18%:30.50 per share.

a.Stock price at 12 PE:366.

b.Stock price at 20 PE:610.

4.FY14 EPS at a CAGR of 25%:36.20 per share.

a.Stock price at 12 PE:434.4

b.Stock price at 20 PE:724.

IGL is a good stable stock to play the city gas distribution in India but is fully priced at the current levels of 395, from these levels I think the returns will be modest.

The company has some pricing power and has passed on increase in gas prices to the customer periodically, demand is very strong but gas availability is a big issue (since imported RLNG is costly, it would dent margins to that extent).

That possibility may soon turn into reality.

The margins of gas distribution companies may soon be regulated.

Gas co stocks down as regulator to fix marketing margins - Moneycontrol.com -

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IGL gets Rs 1,000-cr hit from regulator.

This is an unmitigated disaster, this directive will destroy the company.

From the same article:

This is exactly why I think consumer stocks are the best long-term bets in India.

Indian government and bureaucracy is obsessed with socialism and populism.

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Bought 50 @ 192 and 50 @ 199.

I am just trading. Don't follow me, I am a bad trader. .

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Placed a buy order for 15 shares at 175 and also 5 shares of Gujarat Gas at lower circuit. Planning to hold for long.

captainjee you have already made money equal to banks one year fixed deposit amount, where you want to exit?

cmp at 220+

Good intraday trade.

I will exit just before the market closes or if my stop-loss is triggered.

I have kept a stop-loss at 209.95.

PNGRB's order is a crazy order and fundamentally, I still don't see value at 200.

I am long just because I am expecting a technical bounce.

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Alchemist did you exit the stock?

Yes, on the same day at 231.50.

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This is going to go down further to 175 before bouncing back, but sure there will be a HC order in favour of the stock.

Even though PNGRB's order is harsh, it may not be turned down by the courts.

The gas companies were making abnormal profits and this had to be corrected.

See post #4 in this thread.

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