Motilal Oswal's research report on Indraprastha Gas
In 1QFY26, IGL’s EBITDA margin of INR6.2/scm came in below our est. of INR6.8/scm. Volumes at 9.13mmscmd stood in line with our estimate. Adj. realization increased by ~INR0.7/scm QoQ, while gas cost/opex declined by INR0.4/INR0.5 per scm QoQ. Resulting EBITDA stood 10% below our estimate at INR5.1b (-12% YoY). Our earnings assumptions are conservative: We build in EBITDA/scm of INR6.3/INR6.5 in FY26/FY27 vs. medium-term guidance of INR7-8. Further, we estimate 7% YoY volume growth in both FY26/FY27 vs. 10% YoY growth guided by management. Upside risks: 1) strong growth in new GAs (growing at 30%+ YoY), 2) majority of the GAs now reaching EBITDA positive levels, and 3) margin expansion led by change in zonal tariff regulation.
Outlook
We value IGL at 16x FY27E consol. P/E, and add INR48/sh as a value of JVs to arrive at our TP of INR225/sh. At a 2.6% FY27E dividend yield and 10% EPS growth, we believe the valuation is attractive. Hence, we maintain our BUY rating on the stock, with a TP of INR250.
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