May 30, 2018 - stock is trading at 20.0x of FY19E and at 17.8x FY20E earnings. ..... 1102, Stock Exchange Tower, Dalal S
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Indraprastha Gas Ltd
RESULT UPDATE
30th May, 2018
India Equity Institutional Research II
Result Update – Q4FY18
Indraprastha Gas Ltd
II
30th May, 2018
Page 2
Volume momentum continues, long term growth prospects in place
CMP
Target
Potential Upside
Market Cap (INR Mn)
Recommendation
Sector
INR 265
INR 387
45.8%
185,325
BUY
Oil & Gas
Result highlights Indraprastha Gas Ltd. (IGL) reported net sales of INR 12.3 bn (+23.1% YoY, 4.1% QoQ) driven by volumes from both CNG and PNG segment and increased CNG/PNG realizations. Total gas sales volumes were reported at 482 mmscm v/s 433 mmscm in Q4FY17. CNG volumes increased by 10% YoY while PNG volumes increased by 15% QoQ with the highest growth coming from the domestic segment at 22% YoY. Higher realizations for CNG/PNG for the quarter negated the increase in the cost of natural gas to a certain extent leading to an EBITDA of INR 6.05/scm. However, the provision made for trade margins payable to the OMCs amounting to INR 160 mln has been revered in the quarter, after adjusting for which the EBITDA/scm stands at INR 5.71/scm, higher than INR 5.30/scm in Q4FY17. OPM increased by 116 bps YoY to 22.3%. EBITDA stood at INR 2.75 bn (+29.8% YoY, 4.7% QoQ). PAT came in at INR 1.58 bn (+18.4% YoY) from improved operational performance. The board has recommended a final dividend of INR 2 per share. MARKET DATA
KEY FINANCIALS Particulars (INR Mn) Revenue from Operations EBITDA PAT EPS Diluted (INR) OPM (%) NPM (%) P/E (x)
700
Shares outs (Mn)
1400
Equity Cap (INR Mn)
185325
Mkt Cap (INR Mn)
344/203
52 Wk H/L (INR)
2696.7
Volume Avg (3m K) Face Value (INR)
2
Bloomberg Code
IGL IN
FY16 36,858 7,747 4,579 6.54 21.0% 12.4% 40.7
FY17 38,148 9,638 6,063 8.66 25.3% 15.9% 30.8
FY18 45,921 10,973 7,047 10.07 23.9% 15.3% 26.5
FY19E 55,261 14,058 9,282 13.26 22.4% 14.6% 23.1
FY20E 63,371 15,806 10,423 14.89 22.8% 14.9% 19.7
Source: Company, KRChoksey Research
Volume growth momentum continues IGL’s gas sales momentum remained intact as the company witnessed a 11.3% overall increase YoY in the CNG and PNG volumes. CNG sales volume increased by 9.9% YoY to 333 mmscm from increase in private vehicle conversion, while PNG sales volume registered a 15.9% growth YoY to 124 mmscm as a result of higher connections coming in from industrial/commercial segment due to the recent ban on pet coke and furnace oil thus pushing companies to move to using natural gas. We expect the volume growth to remain in this trend with CNG/PNG volumes increasing at a CAGR of 9.8%/19.5% over FY1820E on account of higher conversions due to the recent hike in the alternate fuels as well as increased volumes from Rewari and Karnal district.
SHARE PRICE PERFORMANCE
460 360
Higher EBITDA margin on account of higher realizations 260
The reported EBITDA/scm came in higher at INR 6.05/scm (v/s INR 5.30/scm in Q4FY17) despite increase in the cost of natural gas, primarily due to increased realizations of both CNG and PNG as well as rupee depreciation. A provision made for trade margins payable to the OMCs amounting to INR 160 mln has been revered in the quarter, after adjusting for which the EBITDA/scm stands at INR 5.71/scm. We expect the EBITDA/scm to be ~INR 5.04/5.83 per scm for FY19E/20E as the company has recently announced price hike of CNG by ~3.2% which will bring stability into the operational performance.
160
Indraprastha Gas
May-18
Nov-17
May-17
Nov-16
May-16
May-15
Nov-15
60
Increase in CNG prices
Sensex
The company has stated has hiked the prices of CNG by 3.3% or INR 1.36/kg in Delhi where as for the adjoining areas of Noida, Greater Noida and Ghaziabad, prices have been raised by 3.2%. The increase has been made on account of increase in NG costs and rupee depreciation since the last revision in April and also due to revisions in the proportion of domestic gas allocation for supply as CNG. Additionally, the current CNG prices are already at a discount of 35-40% relative to the other fuels thus giving the company the pricing power to pass on the increase in price to consumers. IGL has however left the prices of PNG unchanged.
MARKET INFO 34906
SENSEX
10614
NIFTY
SHARE HOLDING PATTERN (%) Particulars
Mar 18
Dec 17
Sep 17
Promoters
45
45
45
FIIs
21.31
24.81
25.26
DIIs
16.18
13.63
13.46
Others
17.52
16.56
16.28
100
100
100
Total ANALYST
Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
17.3% Revenues CAGR between FY 18 and FY 20E KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
20.0% EBITDA between FY 18 and FY 20E +91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q4FY18
II
30th May, 2018
Page 3
Indraprastha Gas Ltd Encouraging number of CNG conversions The company currently meets fuel requirements of over 1.05 million vehicles running on CNG in NCR through its network of 466 CNG stations. Even after the latest revision of CNG prices and increased petrol and diesel prices, the use of CNG as a fuel for a consumer is expected to result in savings of ~60% and 40% for petrol and diesel, respectively. Expansion plans in progress In order to move in line with the govt’s plans, IGL has carried out robust plans to offer CNG connections by increasing its penetration in the existing areas and entering adjoining areas. IGL has already begun its operations of supplying gas in Rewari district and has also received permission from the Haryana govt to set up its CGD network in the district of Karnal. Valuation & Outlook: IGL remains at an advantageous position on account of the rising concern for pollution in the NCR and Greater Noida region. The recent ban on use furnace oil and pet coke further favours the use of natural gas. The gradual rise in the number of vehicles opting for conversion and the rising number of households for PNG will add to the company’s financial performance. We expect the revenues to grow at a CAGR of 17.3% over FY18-20E and EBITDA to grow at a CAGR of 20% over FY18-20E. At a CMP of INR 265.5, the stock is trading at 20.0x of FY19E and at 17.8x FY20E earnings. We valued the company by assigning a multiple of 26x on the FY20E EPS of INR 14.89 and arrived at target price of INR 387 (potential upside – 45.8%). We maintain BUY rating on the stock. SALES VOLUME PERFORMACE Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q-o-Q (%)
Y-o-Y (%)
CNG (mln kgs)
231
233
248
257
257
256
-0.4%
10%
PNG (mmscm)
104
107
109
120
126
124
-2%
16%
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q-o-Q (%)
Y-o-Y (%)
Sales (INR/scm)
24.7
25.6
26.0
25.9
27.0
28.1
4%
10%
Cost of gas (INR/scm)
12.2
12.8
12.3
12.4
13.9
14.0
1%
10%
EBITDA (INR/scm)
5.8
5.3
6.2
5.9
5.4
5.7
5%
8%
Source: Company, KRChoksey Research
FINANCIALS PER SCM
Source: Company, KRChoksey Research
QUARTERLY PERFORMANCE Particulars (INR Mn)
Q4FY18
Q3FY18
Q4FY17
Revenue from operations
12,329
11,839
10,019
4.1%
23.1%
Cost of natural gas
6,772
6,731
5,536
0.6%
22.3%
-2
-3
-1
-45.5%
157.1%
Cost of goods sold
6,770
6,727
5,535
0.6%
22.3%
Gross Profit
5,559
5,112
4,484
8.8%
24.0%
Gross Margin (%)
45.1%
43.2%
44.8%
191 bps
33 bps
277
274
184
0.9%
50.7%
2,529
2,207
2,179
14.6%
16.1%
Total Expenditure
2,805
2,481
2,362
13.1%
18.8%
EBITDA
2,754
2,631
2,122
4.7%
29.8%
EBITDA Margin (%)
22.3%
22.2%
21.2%
11 bps
116 bps
470
453
244
3.8%
93.0%
Decrease/(Increase) in natural gas stock
Employee benefit expense Other expenses
Depreciation and Amortization Expense EBIT
Q-o-Q (%)
Y-o-Y (%)
2,283
2,177
1,878
4.9%
21.6%
Finance Cost
6
4
12
69.4%
-49.6%
Other Income
267
326
209
-17.9%
28.0%
2,545
2,499
2,075
1.8%
22.6%
957
840
734
14.0%
30.4%
Profit before Tax (PBT) Tax Expense Profit after Tax (PAT)
1,587
1,659
1,341
-4.3%
18.4%
Net Profit Margin (%)
12.9%
14.0%
13.4%
-114 bps
-51 bps
11.34
11.85
9.58
EPS Basic (INR) Source: Company, KRChoksey Research
ANALYST Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q4FY18
II
30th May, 2018
Page 4
Indraprastha Gas Ltd GAS VOLUMES Particulars
FY15
FY16
FY17
FY18
FY19E
FY20E
CNG (mmscm)
1,048
1,086
1,199
1,326
1,479
1,617
PNG (mmscm)
330
342
406
479
574
687
Particulars
FY15
FY16
FY17
FY18
FY19E
FY20E
CNG realization (INR/scm)
28.4
28.5
27.4
29.3
30.8
31.9
PNG realization (INR/scm)
32.0
29.4
22.6
24.3
26.6
26.5
Source: Company, KRChoksey Research
GAS REALIZATIONS
Source: Company, KRChoksey Research
INCOME STATEMENT Particulars (INR Million)
FY16
FY17
FY18
FY19E
FY20E
Net Revenue from Operations
36,858
38,148
45,921
55,261
63,371
Purchase of Natural Gas
22,754
20,840
24,918
29,071
33,080
7
-3
-4
0
0
Cost of Goods Sold (COGS)
22,761
20,837
24,914
29,071
33,080
Gross Profit
14,097
17,311
21,007
26,190
30,292
Gross Margin (%)
38.2%
45.4%
45.7%
47.4%
47.8%
784
917
1,061
1,364
1,564
Other expenses
5,566
6,756
8,973
10,768
12,922
Total Operating Expense
6,349
7,673
10,034
12,132
14,486
EBITDA
7,747
9,638
10,973
14,058
15,806
EBITDA Margin (%)
21.0%
25.3%
23.9%
25.4%
24.9%
Depreciation
1,563
1,671
1,813
1,731
1,895
EBIT
6,185
7,967
9,161
12,327
13,911
Finance Cost
99
12
17
17
17
Other Income
242
459
926
974
1,022
6,327
8,414
10,070
13,283
14,916
543
625
719
996
1,119
Profit before Tax (PBT)
6,870
9,039
10,789
14,280
16,034
Total Tax expense
2,291
2,976
3,742
4,998
5,612
Profit after Tax (PAT)
4,579
6,063
7,047
9,282
10,423
PAT Margin (%)
12.4%
15.9%
15.3%
16.8%
16.4%
EPS Basic (INR)
6.54
8.66
10.07
13.26
14.89
Decrease/(Increase) in natural gas stock
Employee benefit expenses
Profit before Tax (PBT) before share of profit of associates & JVs Share of profit of associates & JVs
Source: Company, KRChoksey Research
ANALYST Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q4FY18
II
30th May, 2018
Page 5
Indraprastha Gas Ltd BALANCE SHEET Particulars (INR Million)
FY16
FY17
FY18
FY19E
FY20E
Share capital
1,400
1,400
1,400
1,400
1,400
Reserves and surplus
24,304
28,717
35,070
42,139
50,076
Total Equity
25,704
30,117
36,470
43,539
51,476
-
-
-
-
-
145
203
128
154
177
Other non-current liabilities
1,788
2,024
2,604
2,604
2,604
Total non-current liabilities
1,933
2,227
2,732
2,758
2,781
6,554
9,230
11,363
11,913
12,491
6
7
9
9
9
Other Current liabilities
293
350
391
471
540
Total current liabilities
6,853
9,586
11,763
12,393
13,040
SOURCES OF FUNDS
34,490
41,930
50,965
58,690
67,297
Net Block
20,192
21,172
24,320
27,589
30,195
Capital work-in-progress
2,669
3,518
3,860
3,860
3,860
Investments accounted for using equity method
3,270
3,661
4,264
4,264
4,264
Financial Assets
63
81
87
104
120
Other non-current assets
186
199
607
700
781
Total non-current assets
26,380
28,630
33,139
36,518
39,220
EQUITY AND LIABILITIES Equity
Non-current liabilities Long term borrowings Employee benefit obligations
Current liabilities Financial Liabilities Employee benefit obligations
ASSETS Non-current assets
Current Assets Inventories
576
517
524
606
694
Other Financial Assets
2,685
6,432
11,500
12,421
13,300
Cash and cash equivalents
4,538
6,086
5,580
8,877
13,777
Other current assets
313
266
222
268
307
Total current assets
8,111
13,301
17,826
22,172
28,078
34,490
41,930
50,965
58,690
67,297
APPLICATION OF FUNDS Source: Company, KRChoksey Research
ANALYST Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q4FY18
II
30th May, 2018
Page 6
Indraprastha Gas Ltd CASH FLOW STATEMENT Particulars (INR Million)
FY16
FY17
FY18
FY19E
FY20E
Profit before Tax (PBT)
6,870
9,039
10,789
14,280
16,034
7,807
9,717
13,605
16,028
17,946
8,410
12,163
16,845
15,969
17,980
Less: Income Tax Paid (net of refunds)
-1,875
-2,687
-3,742
-4,998
-5,612
Net Cash generated from/(used in) operating activities
6,535
9,476
13,103
10,972
12,368
Net Cash Used In Investing Activities
-1,746
-11,139
-10,625
-5,445
-4,967
Net Cash Used in Financing Activities
-2,564
-1,613
-1,697
-2,230
-2,502
2,226
-3,277
781
3,297
4,899
2,307
4,533
1,256
2,037
5,334
4,533
1,256
2,037
5,334
10,233
FY16
FY17
FY18
FY19E
FY20E
13.3% 24.1% 17.8%
14.5% 26.5% 20.1%
13.8% 25.1% 19.3%
15.8% 28.3% 21.3%
15.5% 27.0% 20.2%
38.2% 19.1% 12.4%
45.4% 22.8% 15.9%
45.7% 21.6% 15.3%
47.4% 23.1% 16.8%
47.8% 22.7% 16.4%
1.2 1.0 25 6 16 15
1.4 1.3 19 5 26 -2
1.5 1.4 18 4 27 -5
1.8 1.7 18 4 26 -4
2.2 2.0 18 4 26 -4
0.0 62
0.0 658
0.0 542
0.0 729.4
0.0 823.1
23.4 40.6 7.2
18.7 30.7 6.2
16.4 26.4 5.1
12.6 20.0 4.3
10.9 17.8 3.6
Operating profit before working capital changes Cash Generated from (/ used in) operations
Net Increase/( Decrease ) in Cash and Cash Equivalents Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year Source: Company, KRChoksey Research
RATIOS Particulars Profitability Return on Assets (%) Return on Capital (%) Return on Equity (%) Margin Trend Gross Margin (%) EBITDA Margin (%) Net Margin (%) Liquidity Current Ratio Quick Ratio Debtor Days Inventory Days Creditor Days Working Capital Days Solvency Total Debt / Equity Interest Coverage Valuation Ratios EV/EBITDA P/E P/B Source: Company, KRChoksey Research
ANALYST Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q4FY18
II
30th May, 2018
Page 7
Indraprastha Gas Ltd Indraprastha Gas Ltd
Rating Legend
Date
CMP (INR)
TP (INR)
Recommendation
30-May-18
265
387
BUY
08-Feb-18
289
400
BUY
10-Nov-17
321
400
BUY
17-Nov-16
840
987
BUY
23-Aug-16
734
890
BUY
16-May-16
568
709
BUY
12-FEB-16
519
662
BUY
09-Nov-15
470
498
ACCUMULATE
06-Aug-15
480
532
ACCUMULATE
01-June-15
406
446
ACCUMULATE
Our Rating
Upside
Buy
More than 15%
Accumulate
5% – 15%
Hold
0 – 5%
Reduce
-5% – 0
Sell
Less than – 5%
ANALYST CERTIFICATION: We, Dhavan Shah [B.Com, MS(Finance)], research analyst, Raghav Garg (B.Com, M.Com (Applied Finance)), research analyst and Neha Raichura (CFA Level III Cleared, M.Com), research associate, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & Conditions and other disclosures: KRChoksey Shares and Securities Pvt. Ltd (hereinafter referred to as KRCSSPL) is a registered member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and MCX Stock Exchange Limited. KRCSSPL is a registered Research Entity vides SEBI Registration No. INH000001295 under SEBI (Research Analyst) Regulations, 2014. We submit that no material disciplinary action has been taken on KRCSSPL and its associates (Group Companies) by any Regulatory Authority impacting Equity Research Analysis activities. KRCSSPL prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analyst covers. The information and opinions in this report have been prepared by KRCSSPL and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KRCSSPL. While we would endeavor to update the information herein on a reasonable basis, KRCSSPL is not under any obligation to update the information. Also, there may be regulatory, compliance or other reasons that may prevent KRCSSPL from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or KRCSSPL policies, in circumstances where KRCSSPL might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KRCSSPL will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. KRCSSPL accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Our employees in sales and marketing team, dealers and other professionals may provide oral or written market commentary or trading strategies that reflect opinions that are contrary to the opinions expressed herein, .In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Associates (Group Companies) of KRCSSPL might have received any commission/compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of brokerage services or specific transaction or for products and services other than brokerage services. KRCSSPL or its Associates (Group Companies) have not managed or co-managed public offering of securities for the subject company in the past twelve months KRCSSPL encourages the practice of giving independent opinion in research report preparation by the analyst and thus strives to minimize the conflict in preparation of research report. KRCSSPL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither KRCSSPL nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Dhavan Shah [B.Com, MS(Finance)], research analyst, Raghav Garg (B.Com, M.Com (Applied Finance)) and Neha Raichura (CFA Level III Cleared, M.Com), research associate, of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific brokerage service transactions. KRCSSPL or its associates (Group Companies) collectively or its research analyst do not hold any financial interest/beneficial ownership of more than 1% (at the end of the month immediately preceding the date of publication of the research report) in the company covered by Analyst, and has not been engaged in market making activity of the company covered by research analyst. It is confirmed that, Dhavan Shah [B.Com, MS(Finance)], research analyst, Raghav Garg (B.Com, M.Com (Applied Finance)) and Neha Raichura (CFA Level III Cleared, M.Com), do not serve as an officer, director or employee of the companies mentioned in the report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other Jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject KRCSSPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform them of and to observe such restriction.
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[email protected] Visit us at www.krchoksey.com Kisan Ratilal Choksey Shares and Securities Pvt. Ltd Registered Office: 1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001. Phone: +91-22-6633 5000; Fax: +91-22-6633 8060. Corporate Office: ABHISHEK, 5th Floor, Link Road, Andheri (W), Mumbai – 400 053. Phone: +91-22-6696 5555; Fax: +91-22-6691 9576.
ANALYST Dhavan Shah,
[email protected], +91-22-6696 5590 Raghav Garg,
[email protected], +91-22-6696 5590 Neha Raichura,
[email protected], +91-22-6696 5590
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com