Buy Indraprastha Gas; target of Rs 270: ICICI Securities

ICICI Securities's research report on Indraprastha Gas

Indraprastha Gas (IGL) saw YoY ~17.4%/13.6% dip in Q2FY26 EBITDA/PAT to INR 4.4/INR 3.7bn, below I-Sec’s estimates of INR 5.6/INR 4bn, driven by higher gas cost with a reduction in APM and NWG’s share in Q2. Volume growth, of just 3%, was at an eight-quarter low, with sharper impact of EV visible in Q2 and adverse propane to gas prices impacting industrial volumes. Prospects for the next 2–3 years appear stronger, given: 1) strong rate of vehicle addition in core areas; 2) aggressive infra rollout in non-NCR gas; 3) moderation expected in LNG prices; 4) base to start reflecting full impact of DTC bus volume reduction; and 5) margin strength via tariff rationalisation and reduction in Gujarat VAT. FY26/27/28E EPS changed by -7.3/-1.7/-1.6%. TP unchanged at INR 270. BUY.

Outlook

We value IGL, as per the DCF methodology, using a WACC of 11.1%, DER of 35%, long-term EBITDA assumption of INR 7/scm and terminal growth rate of 2.9%. Our DCF-based valuation delivers a target price of INR 270, viz. ~27% upside from CMP. Maintain BUY.