Accumulate Indraprastha Gas; target of Rs 631: Dolat Capital Market

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26 Aug, 2025 12:21

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Dolat Capital Market's research report on Indraprastha Gas

IGL volume at 6.26 MMSCMD (down 6.5% YoY) with realizations of Rs 25 per SCM (up 3.4% YoY) was in line with our estimates. Volumes in CNG segment de-grew 9%, while Industrial/commercial segment grew 2% with strong performance in Domestic PNG segment of 14% YoY. EBITDA/scm grew 36.7% YoY at Rs 8.7/scm. Gas cost de-grew 31.1% in YoY and by 12.7% sequentially to Rs 10.5/scm. Gross spreads were strong at Rs 14.4 per SCM. Maintenance of spreads at Gross and EBITDA levels will be the key monitorable to be watched out for. Volumes for IGL have recovered to 90% Pre Covid levels with Industrial volumes recovering 100%, domestic PNG volumes at 120%, CNG volumes at 90% and commercial volumes at 50-60% of Pre Covid levels. It is expected that by Q4FY21E avg. sales will surpass last year’s sales. Volume growth outlook for the long term looks good and we believe that IGL should be able to maintain double-digit volume growth trajectory driven by CNG economics and expansion in regions like Rewari and Gurugram. With the order of conversion of industrial units to natural gas from Jan’21, industrial volumes will get a boost. IGL has got full rights of CGD operations in high potential Gurugram region which is a mature area, volumes should take some time to clock in as there can be a slowdown in capex.

Outlook

We continue to like the story considering the business dynamics of IGL. There can be some short term pressure on the stock price as there will be capex spent to the tune of Rs 20,000 mn in next 3 years, Covid Impact can decline revenues for FY21 before getting back to normal levels in FY22, Also the hangover around the common carrier policy by the regulator is done and is in favor of incumbent companies. We recommend Accumulate with a target price of Rs 631. (DCF Method).

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