Expect 30% appreciation in Indraprastha Gas: Maheshwari

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Maheshwari See what other Experts & Brokerages are saying about IndraprasthaGas See messages about IndraprasthaGas IndraprasthaGas BSE | NSE 10/02/12 Are Mutual Funds betting on IndraprasthaGas?

Ashish Maheshwari , MD of India Capital Markets is of the view that one can expect 30% kind of appreciation in Indraprastha Gas in one calendar year.

Maheshwari told CNBC-TV18, "Indraprastha Gas is a defensive pick again. We like this because of its sustained business model of 5-7 years profitability. Besides this is a debt-free company, so there is no interest burden on the company. We have seen a lot of liquidation in this stock from institutional investors who have come out of the stock in last six-months but now that selling has almost stopped and now we are seeing a significant accumulation in the stock from domestic fund side. If we see the business model, they are into Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) business. In CNG side, they are already catering to around 2 lakh plus vehicles in Northern India and in Pipe Natural Gas; they are having more than 1.2 lakh customers in NCR territory."

He further added, "In Delhi on standalone basis there are more than 4 million LPG connections, so it will take at least 8-10 years to bridge that gap from Liquefied Petroleum Gas (LPG) to CNG conversion if consumers are going to convert. Besides this they are also venturing into Noida and Greater Noida where pipeline are already been laid and revenue list are coming from last quarter they have also ventured into Harayana. So looking at CNG as an alternative mode of fuel and with high crude prices, we are visualizing a sustained CAGR of around 20% and same CAGR in bottomline in this company for at least next three-years. So looking at all this, the stock is again available at 8-PE multiple from FY09 earnings. So from here again we are expecting a 30% kind of appreciation in this, in one calendar year."

Disclosure: Analyst has recommended the above stock to his clients.