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Last Updated : Sep 16, 2020 11:18 AM IST | Source: Moneycontrol.com

Indraprastha Gas shares fall 2%; Motilal Oswal sees 12% upside in stock

The CNG segment could see opportunity from COVID as the use of personal vehicles increases and people move away from shared mobility, thus increasing demand in the CNG segment, Motilal said.

 
 
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After three consecutive sessions of gains, shares of Indraprastha Gas (IGL) traded in the red after declining over 2 percent in the morning trade on BSE on September 16.

On September 15, the company held an investor conference organised by Motilal Oswal Financial Services.

Motilal Oswal has a neutral call on the stock with a target price of Rs 470, a 12 percent upside from the stock's closing of September 15 on BSE.

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As per Motilal Oswal, IGL has about 75 percent of its volumes coming from CNG. This segment led growth for the last couple of years, led by the proliferation of CNG stations and higher conversions.

"However, opening up of schools and normalisation of public transportation (for CNG) and commercial space like malls and restaurants (for PNG) may take more time," the brokerage firm added.

"Nevertheless, we reiterate our belief in the company’s volume trajectory (in line with management guidance), led by growth in NCR, intercity travel on CNG, higher conversions to CNG due to the BS-VI implementation, and contributions from newer GAs," Motilal Oswal said.

The CNG segment could see opportunity from COVID as the use of personal vehicles increases and people move away from shared mobility, thus increasing demand in the CNG segment, Motilal said.

IGL expects EBITDA margin growth of 3–4 percent per year going ahead (as the company expects gas prices to remain benign in the near-term), Motilal Oswal pointed out.

The stock trades at around 24.4 times FY22 EPS of Rs 17.2 and EV/EBITDA of 15.1 times in FY22.

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First Published on Sep 16, 2020 11:18 am
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