Shares of Indraprastha Gas Limited (IGL) surged over 6 percent after UBS upgraded the stock to a 'buy' from its previous 'sell' rating, raising the target price to Rs 700 per share from Rs 400. The brokerage highlighted IGL's strong near-term fundamentals, complemented by promising inorganic growth prospects.
UBS expects IGL's volume growth to improve, forecasting a rise from 4 percent year-on-year in FY24 to an 8.2 percent compound annual growth rate (CAGR) between FY24 and FY27.
Key drivers for this growth include infrastructure expansion and entry into new geographies, the firm said. Additionally, potential mergers and acquisitions, which have yet to be factored into the price, could further enhance value, UBS added.
Meanwhile, Mahanagar Gas Ltd (MGL) shares gained around 6 percent to hit a 52-week high as UBS maintained a 'buy' rating on the stock, but raised the target price to Rs 2,400 from Rs 1,600 per share earlier.
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The brokerage highlighted that both organic and inorganic volume growth could continue to exceed expectations.
UBS raised its total volume estimates for FY25-27 by 7-11 percent, driven by infrastructure development and the expansion of the CNG fleet. Additionally, it has raised its FY25-27 EBITDA per scm forecast by 6-11 percent to Rs 12.1-12.3/scm, factoring in MGL's pricing strategies. Potential M&A opportunities have not yet been accounted for in this assessment.
At 10:37 am, IGL stock was trading 5.4 percent higher at Rs 558.90 on NSE while MGL was up 6.3 percent at Rs 1,936.65. The stocks have rallied 33 and 60 percent, respectively, so far this year, massively outperforming Nifty's returns of 16 percent.
In the past 12 months, IGL has gained 19 percent bit MGL has zoomed 83 percent. In comparison, Nifty rose 28 percent during this period.
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