IGL rises 5%; analysts retain positive stance post Q2 earnings

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Indraprastha Gas (IGL) shares gained more than 5 percent intraday Thursday as analysts of brokerage houses maintained positive stance on the stock, citing good Q2 earnings and likely growth in volumes.

"IGL has been a key beneficiary from the recent focus by the judiciary and state/central government on the increase in air pollution in Delhi. Volume growth for both CNG and PNG has seen a sharp rebound in the past few quarters. Volumes growth could further improve and IGL may positively surprise on margins," Nomura says in its research note.

While reiterating a buy on the stock, Citi raised its FY17-19 earnings by 2-11 percent (higher margins), and target price to Rs 976 from Rs 876. It expects volumes to grow at a 9 percent CAGR over FY16-19 (against 3 percent over FY14-16).

The brokerage house prefers Indraprastha Gas over Mahanagar Gas due to better growth opportunities – both organic (policy push) and inorganic (CUGL+MUGL); scope for higher payouts; potential for margin upside; domestic gas prices are likely to change very marginally in the next round of price revision (Apr); and better longer-term growth options (Gurgaon, CNG 2-wheelers, new cities such as Rewari, Mumbai-Delhi CNG corridor, etc).

IGL's profit during July-September quarter grew by 42 percent year-on-year to Rs 144.2 crore, driven by operational performance and other income. EBITDA jumped 23.5 percent to Rs 245 crore and margin expanded by 430 basis points to 22.9 percent on CNG-led volume growth YoY but sequentially margin declined due to one-off provision for the sites taken on lease from Delhi Development Authority for CNG stations. Revenue increased only 0.2 percent to Rs 1,070.9 crore compared with year-ago period.

Volume growth was strong at 12 percent YoY with CNG (compressed natural gas) rising 11 percent and PNG (piped natural gas) 13 percent. PNG volume growth was led by 44 percent growth (due to low base effect) in natural gas sales to Haryana City Gas (a city gas distribution entity in Ghaziabad) which earns significantly lower margins.

Deutsche Bank has retained hold rating on valuation as the stock is trading at five-year highs with a FY18 price-to-book value of 3.4x and P/E of 17x.

At 12:22 hours IST, the scrip of Indraprastha Gas was quoting at Rs 839.90, up Rs 17.80, or 2.17 percent on the BSE.Posted by Sunil Shankar Matkar