Hold Indraprastha Gas; target of Rs 500: Emkay Global Financial

Emkay Global Financial's research report on Indraprastha Gas

IGL’s Q4FY23 SA EBITDA/APAT is Rs4.66/3.30bn, down 7/2% YoY and up 9/19% QoQ. Earnings missed our estimates by 2-3%, on slightly lower EBITDA/scm at Rs6.3 (up 9% QoQ). Total gas sales volume was in-line, at 8.25mmscmd, up 7% YoY/2% QoQ (CNG/PNG up 8%/2% YoY). Mgmt restated its volume guidance of 9/10mmsmcd for FY24/25E, with target EBITDA/scm of Rs7.5-8 supported by stable gas & alternate fuel prices. Demand is expected to be led by new GAs, which will attribute 50% of the Rs15-16bn pa capex ahead. IGL received 87%/5% APM+/HP-HT gas under the priority sector in Q4, with the balance being LNG.

Outlook

We raise FY24E/25E EPS by 5%/7%, building-in better margins, with revised DCF-based Mar-25E TP of Rs500/sh. Given limited stock upside, we downgrade IGL to HOLD from Buy. Volume growth is the key trigger.