Dolat Capital is bullish on Indraprastha Gas has recommended buy rating on the stock with a target price of Rs 376 in its research report dated May 27, 2019.
Dolat Capital's research report on Indraprastha Gas
IGL volume at 6.27 MMSCMD with realizations of ` 27.2 per SCM (up 7.3% YoY) was ahead of estimates. Volume growth was spurred by strong performance in the industrial segment. Gas cost also reduced 3.9% sequentially. Gross spreads were strong at ` 11.2 per SCM. We believe that gas cost should increase sequentially and IGL has taken adequate price hikes to maintain / expand spreads. Volume growth outlook 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. IGL has got full rights of CGD operations in high potential Gurugram region. This enhances our confidence on long term volume outlook. We continue to like the story considering the business dynamics of IGL.
We bring in FY21 estimates and value it on DCF. There can be some short term pressure on the stock price as there will be capex spent undertaken for new areas. We reiterate our Buy recommendation with a target price of ` 376. (DCF Method).
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