Buy Indraprastha Gas; target of Rs 585: Sharekhan

Sharekhan is bullish on Indraprastha Gas has recommended buy rating on the stock with a target price of Rs 585 in its research report dated May 15, 2023.

Broker Research

May 16, 2023 / 23:13 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

Sharekhan's research report on Indraprastha Gas

Q4FY2023 operating profit growth of 8.8% q-o-q to Rs. 466 crore (up 9% q-o-q) was in-line with our expectation and was driven by 1.7%/9.4% q-o-q increase in gas sales volume to 8.3 mmscmd and Rs. 6.3/scm respectively. PAT at Rs. 330 crore (up 18.5% q-o-q) missed our estimate by 3% due to lower-than-expected other income. Volume growth was mixed with just 0.6% q-o-q increase in high margin CNG volumes to 6.1 mmscmd while D-PNG/I&C volume grew by 12%/3% q-o-q to 0.6 mmscmd/1 mmscmd. EBITDA margin improvement of 9.4% q-o-q was much lower versus 54% q-o-q margin expansion for MGL. The management maintained its 11% volume CAGR guidance over FY23-25E and aim reach 10 mmscmd of volume by FY25 with focus on margin expansion to Rs. 7.5-8/Rs. 9 per scm for FY24E/FY25E as gas cost likely to decline to Rs. 25/scm versus Rs. 35/scm in FY23.

Outlook

We maintain a Buy on IGL with a revised PT of Rs. 585 given our expectation of earnings recovery (expect 19%/15% EBITDA/PAT CAGR over FY23-25E) and an attractive valuation of 18x its FY2025E EPS (at discount of 12% to its five-year average one-year forward PE multiple of 24x).

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