ICICI Securities research report on Indraprastha Gas
Indraprastha Gas (IGL) reported ~27/31% dip in Q4FY25 EBITDA/PAT, but earnings were still ahead of I-Sec estimates, helped by a small beat on adjusted EBITDA/scm (INR 4.6/scm vs I-Sec est of INR 4.3/scm). Reported earnings were helped by INR 1.14bn reversal of provisions (settlement of an older dispute related to CY19-21). FY25 adj EBITDA/PAT of INR 18.65/13.8bn declined 22/21%, respectively, due to sharply lower margins on APM gas de-allocation. Volume growth of 6.7% in FY25, however, is positive and guidance of 8-9% growth for next 2-3 years is supported by multiple factors over FY26-28: i) Stronger CNG conversion, ii) tie up of higher term LNG, negating spot LNG requirements, iii) growth from industrial/commercial segment and iv) aggressive infra expansion, specifically in new areas. Valuation is also attractive; reiterate BUY with TP of INR 255.
Outlook
However, we note FY25 volumes have surprised positively and despite the reduction in APM volumes, a combination of lower LNG prices, still competitive pricing vs petrol/diesel and aggressive growth from newer areas can drive better-than-expected growth over FY26-30E. Given the sharp 20% dip in stock price in the last one year, current valuations of 15.5x FY27E PER and 8.7x EV/EBITDA, are unchallenging. With a robust 38% upside implied by our revised TP of INR 255/sh vs CMP, maintain BUY.
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