Buy Indraprastha Gas; target of Rs 650: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on Indraprastha Gas

Q1FY22 PAT of Rs. 244 crore (down 26.2% q-o-q) missed our estimate due to lower-than-expected volume of 5.3 mmscmd (down 22.1% q-o-q), slight miss in EBITDA margin at Rs. 7.9/scm (down 1.7% q-o-q) and lower other income. CNG/Industrial-Commercial PNG/third-party sales/domestic-PNG volumes declined by 25%/18%/20%/4% q-o-q amid COVID-led lockdown; higher per unit opex offset benefit of increase in gross margins to Rs. 14.4/scm (up 5.5% q-o-q). Recent recovery in CNG volumes to pre-COVID levels and hike in CNG/D-PNG prices in July bodes well for strong earnings revival. Long-term volume growth outlook remains intact supported by gradual shift towards gas-based economy; management has been guiding for a 10-12% volume CAGR in the next four years.

Outlook

IGL’s recent underperformance to Gujarat Gas presents an investment opportunity given strong earnings growth outlook. Hence, we maintain a Buy on IGL with an unchanged PT of Rs. 650. At CMP, the stock trades at 23.6x its FY23E EPS.

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