Analysis of Indraprastha Gas Share Price

What prompted me to do analysis of Indraprastha Gas share price?

I noticed during my study of stock market in general that S&P BSE Utilities Index is trading very close to its 52W Low levels.

Out of the major companies listed in S&P BSE Utility index, Indraprastha Gas was ranked 6th in terms of Market capitalisation.

Moreover, glancing roughly at its balance sheet and profit and loss accounts of the company, it looked encouraging.

Hence I decided to do a deeper fundamental analysis of Indraprastha Gas using my stock analysis worksheet.


About Indraprastha Gas:

Indraprastha Gas is the only supplier which provides Compressed Natural Gas (CNG) to the NCR Delhi region.

It provides CNG to automotive refilling stations, PNG (Pipes Natural Gas) to households, hotels, restaurants etc.

Mr. S.Ramesh is the Chairman of the Board of Indraprastha Gas. He is also in the Board of Directors of BPCL as Director (Marketing).

Mr. E.S. Ranganathan is the Managing Director of Indraprastha Gas. Earlier he worked as whole time director of GAIL (India).

Indraprastha Gas came into existence in 1998. It was a joint venture between GAIL and BPCL, who are also their major shareholder/promoters.

The shareholding of GAIL and BPCL is as below:

  • GAIL (India) Ltd: 22.5%
  • BPCL : 22.5%

In last five years, the shareholding of GAIL and BPCL has remain unaltered.

Indraprastha Gas Share Price - shareholding pattern

Short term price movement of Indraprastha Gas

In last 30 days, Indraprastha Gas share price has dropped from Rs.334 to 290 levels. This is a drop of 13.2% in just 1 month.

This is a sudden price drop and may have caused its shares to trade at levels close to its intrinsic value.

I want to include this stock in my watch list for 3 reasons:

  • It works in a Sector (Utility) whose demand is only going to go up in India in next years.
  • This sector (utility) is currently trading weak. Hence it is more likely to pick good stocks here at undervalued price levels.
  • Overall glance on the companies financial reports says that, the company has strong fundamentals.

Now the only thing that remains to be done is:

  1. Detailed fundamentals analysis, which also includes
  2. Estimating intrinsic value of this stocks.

If current price of this stocks is anywhere close to its intrinsic value, it becomes very interesting.

This is a GOI enterprise. Hence I find it more comforting to invest in a GOI company which also has strong business fundamentals.

There is one more reason which is dragging me towards Indraprastha Gas. Indian stock market is going for a possible correction. This will further make Indraprastha Gas share price cheaper.

These are my findings about Indraprastha Gas share price analysis:

#1. Growth Rates:

I personally like stocks which show’s consistent growth in its past.

It becomes particularly interesting for me when I see a double digit growth rates. Indraprastha Gas provides just that for me.

The financial parameters that like seeing grow in a stock are as below:

  • Free Cash Flow Growth
  • Reserves Growth
  • Income Growth
  • Profit Growth
  • Dividend Growth &
  • EPS growth (my favorite)

I use my stock analysis worksheet to quantify all these values. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - Growth Rate

#2. Financial Ratios

The use of financial ratios helps users to comprehend the numbers easily. It helps to compare apple to apple.

Financial ratios also helps us to make the first impression about the stocks, before digging into the details.

The ratios that my worksheet highlights prominently are as below:

  • Price Valuation
    • Price to Earning Ratio (P/E)
    • Price to Book Value Ratio (P/B)
    • Price to Sales Ratio (P/S)
    • Price to Free Cash Flow (P/FCF)
  • Profitability
    • Return on Equity (ROE)
    • Return on Capital Employed (RoCE)
    • Cash Returned on Invested Capital (CROIC)

I use my stock analysis worksheet to quantify all these values. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - Ratios

#3. Important Miscellaneous Data

Before investing, it is important to look at a few indicators that gives a rough idea about the current position of the stocks price.

What are these few indicators?

  • Current price compared to its 52W high and Low price.
  • How much the price changed in last 30 days and 12 months.
  • What is the market cap.
  • Compared to the Industry P/E, what is the P/E of stock.
  • What is the price growth in last 3Y, 5Y and 10Y.
  • What is the average dividend yield in last 3Y, 5Y and 10Y.

I use my stock analysis worksheet to get quick answers to these questions. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - MiscData

#4. Price Chart of Last 10 Years

Why I like to see price chart?

Frankly speaking price charts tell very less about a stock (unless you are a technical analyst).

But I still like to give it a glance. Why? It gives an idea of how the current price is placed compared to last 10 years trend.

There can be few scenarios here:

  • If price is only bullish – current price can be overvalued.
  • If Price is remaining modest – poses a question why price is not growing fast enough?
  • When price is falling – current price can be undervalued or business fundamentals may be weakening.

I use my stock analysis worksheet to generate the 10 Year price chart. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - PriceTrend

#5. Quarterly Trends

Why to look at quarterly results?

For long term investors, long term trends are more valuable. But it is also essential that the investor should not miss noting the short term trends.

If in short term term, the income, earnings are falling, it poses a risk.

Investor must get the answers for the Why’s before proceeding.

The quarterly trends that I refer are as below:

  • Total Income – TTM data verses last FY data (if rising or falling).
  • Net Profit – TTM data verses last FY data (if rising or falling).
  • Earning Per Share (EPS) – TTM data verses last FY data (if rising or falling).

I use my stock analysis worksheet to get pictorial chart for the above important informations. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - QTrend

#6. What is the Intrinsic Value of this stock?

This worksheet may not be accurate, but it attempts to estimate Intrinsic value of stocks.

I believe that, even if it is a rough estimation of intrinsic value, it is still worth doing it.

Because investing in a stock without comparing its intrinsic value with its current price is a big mistake.

Based on the knowledge that has been gathered, this worksheet attempts to estimate the intrinsic value of its stock.

There are several ways to estimate intrinsic value of a stock. But I rely more on the following methods.

I have incorporated all of my favourite method in my worksheet to estimate intrinsic value of stocks. An intelligent formula the generates the net intrinsic value of the stock derived from all these individual methods:

  • DCF method
  • NCAPS method
  • Absolute PE method
  • Reproduction cost method
  • Benjamin Graham’s Formula
  • Earning Power Value (EPV)

I use my stock analysis worksheet to estimate intrinsic value of stock. This is the result for Indraprastha Gas:

Indraprastha Gas Share Price - IV

#7. What is the final conclusion?

After considering almost all aspect of stocks as discussed above, my worksheet helps its user to arrive at a final conclusion.

What is the ultimate question in stock investing? The stock is good or bad? How to arrive at this conclusion?

My stock analysis worksheet does this very nicely for me. Based on the following parameters, it generates an overall grade for its stock.

If the generated grade is above 85%, the stock is considered good.

Lets see what grades are generated for Indraprastha Gas:

  • The Overall grade for Indraprastha Gas is 87.5%.
    • The market price of Indraprastha Gas seems to be priced slightly higher. But it scores 89% here.
    • In terms of future growth prospects, Indraprastha Gas gets 100%.
    • Indraprastha Gas earns a good 81% for its managements efficiency.
    • In terms of profitability, Indraprastha Gas scores again a good, 81%.
    • Financial Health of the company is decent at 78%.
    • There is no bankruptcy threat to Indraprastha Gas. It earns 100% here.

It must be noted that, this worksheet gives more importance to the price valuation of stock. A stock which is priced right will score higher.

This worksheet gives score to its stocks very defensively.

There are not many stocks in the market that can earn grade above 80% from this worksheet.

This is one reason why, I can say that Indraprastha Gas looks to be a good stock.

Indraprastha Gas Share Price - OverallScore


Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyse all securities before investing in one.

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11 Comments on "Analysis of Indraprastha Gas Share Price"

  1. Dear money,

    The analysis are really good and helpful.

    Thanks

  2. GOD ANALYSIS

  3. Chintamani Chhatre | March 14, 2018 at 3:03 pm | Reply

    Is EPS and P/E Calculation right? Indraprastha’s P/E ratio is not around 8 but around 33. Looks like this is because Money-control does not adjust historical EPS after stock got split

    • you are right; this analysis is based on 1400 Lakhs outstanding shares, whereas currect outstanding shares are 7000 Lakhs ( a split of 10/2 not considerd here) therefore EPS and PE are wrongly leading to false Intrinsic value. Dear Mani Sir, pls correct the analysis

      • Chintamani Chhatre | April 18, 2018 at 2:27 pm | Reply

        Mani Sir, You should do something to solve this issue and release new version of the sheet. Because intrinsic value and score may not be correct for stocks which had a split or bonus shares issued. I had same problem with Avanti Feeds

        • This worksheet works on the “number of shares currently outstanding”.
          From where it gets this number?
          From moneycontrol.
          This worksheet has no database of its own.

  4. Sudhakar Munirathinam | March 6, 2018 at 11:46 pm | Reply

    Dear Mani,

    Please check the below link, this website is doing similar type of analysis (free for 15 days)
    As per this website, the intrinsic value of the IGL share is 140 Rs. Please advise in what the calculation differs from yours.

    I am using your worksheet to calculate intrinsic value.

    Please which one is accurate…

    https://simplywall.st/stocks/in/utilities/nse-igl/indraprastha-gas-shares

    • For sure their calculation methodology is different.
      Even My worksheet uses 7 methods to arrive at an intrinsic value.
      For indraprastha gas my worksheet gives a range of IV starting from Rs.58 to Rs.403. But to keep things simple, my worksheet does further calculation and use a secret formula to arrive at final ONE VALUE for IV.

  5. Hi,
    How did you get a positive value using the DCF method when the cash flows are mostly negative for Indraprasth resulting in the average being negative? Most people say DCF can not be used with negative cash flows. Please explain. Thanks!

    • One of the better things about “Indraprastha Gas” is that, its “Net CashFlow From Operating Activities” has been been in negative since last 10 years.

  6. By going through the Share Capital in Screener.com, it looks like they have not diluted any shares. Thus, EPS should increase in case of TTM.

Your comments fuels me to write better...