Buy Indraprastha Gas; target of Rs 615: ICICI Securities

ICICI Securities research report on Indraprastha Gas

Indraprastha Gas’ (IGL) Q1FY24 EBITDA and PAT of INR 6.4bn and INR 4.4bn missed our estimates by 2% and 8% respectively, while beating street estimates by 3% on EBITDA. A less-than-estimated volume growth of ~4% vs expectations of ~6% drove the miss. Nevertheless, EBITDA and PAT rose by sharp 38% and 33% QoQ respectively. Volume weakness was due to lower domestic and ‘industrial + commercial’ (I/C) volumes, though as CNG volumes came in-line even in a traditionally weak quarter. Margins were strong, with an INR 2.3/scm QoQ improvement in gross and EBITDA/scm.

Outlook

Going forward, we expect volume momentum to improve with resumption of schools likely to drive higher CNG demand, while softer prices are likely to drive higher domestic and I/C volumes. Our BUY rating stays, with a revised [DCF based] target price of INR 615/sh (earlier: INR 630/sh).