Buy Indraprastha Gas; target of Rs 575: HDFC Securities

HDFC Securities' research report on Indraprastha Gas

We maintain our BUY recommendation on Indraprastha Gas (IGL) with a target price of INR 575, given (1) strong volume growth at ~12% CAGR over FY23-25E, (2) robust margins with the government allocating gas from the HPHT (highpressure, high-temperature) fields to the priority sector, and (3) a strong portfolio of new geographical areas (GAs) ensuring volume growth visibility. Q1FY24 EBITDA/APAT stood at INR 6.4/4.4bn, up +4/4% YoY respectively, and came in marginally below our estimate, owing to lower-than-expected volumes and marginally higher-than-expected input gas cost. The reported volume stood at 8.2mmscmd, up +4% YoY; however, it declined 0.7% QoQ.

Outlook

Our target price is INR 575 (WACC 11.5%, terminal growth rate 3.0%). The stock is trading at 16.8x Sep-24E EPS.

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