IGL Q4 earnings: What should investors do now? Buy, sell or hold?

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Here is what brokerages have to say about the stock and the company after the March quarter earnings:

CLSA | Rating: Upgrade to buy | Target: Rs 630

It’s the steadiest volume-growth story in city gas space. The recent underperformance to MGL & Gujarat Gas provides a good entry point. It is also a good post COVID-19 reopening play with rebound in mobility.

Nomura | Rating: Buy | Target: Rs 650

The Q4 was a miss, but overall good numbers. The margin is likely to be more than Rs 8/scm in H1FY22 and expect city gas companies to pass bulk of sharp domestic gas price hike in H2FY22. Broking firms see upside risks to FY22-23 earnings.

Morgan Stanley | Rating: Overweight | Target: Rs 650

The company reported an earnings beat on better volume growth & cost control. Morgan Stanley see an upside risks to earnings growth ahead

Macquarie | Rating: Outperform | Target: Raised to Rs 600 from Rs 550

The FY21 EBITDA stood largely flat, despite a 17 percent YoY drop in volumes. It raised FY23 EPS estimate by 6 percent on a better margin outlook. The faster recovery expected post second COVID wave.

Citi | Rating: Buy | Target: Rs 640

The underlying performance was better, with volumes ahead of estimates. The volumes are back above pre-COVID levels.

Motilal Oswal | Rating: Neutral | Target: Rs 480

IGL could increase its sales volume from new areas such as Rewari, Karnal, and Muzaffarnagar; Haryana City Gas; and the newly-awarded Gas in the 10th round — a) Kaithal (Haryana), b) Ajmer, Pali, and Rajsamand (Rajasthan), and c) Kanpur, Fatehpur, and Hamirpur (Uttar Pradesh).

Introduction of EVs could dent CNG demand over the long term. Delhi’s recently revised EV policy is directed at 2W and 3W, thus impacting 3W CNG volumes (which constitute ~10 percent of total volumes). The management expects EV buses to ply on the roads of Delhi over the next 2-3 years, challenging current total volumes of ~25 percent used by CNG buses.

Prabhudas Lilladher | Rating: Buy | Target: Rs 662

We lower our FY22-23 earnings estimate by 8.7/5.6 percent to factor in lower volume assumption even as we increase our margins. FY21 was a difficult year for IGL as pandemic restrictions on vehicle movement hit CNG volumes. However, easing of restrictions along with rising vaccination coverage will limit incidence of lockdown, going ahead.

IGL remains an enviable business model with high volume growth due to geographical expansion and addition of new buses and taxis. Also, shift to private vehicle ownership post pandemic will drive CNG volumes.

Nirmal Bang | Rating: Accumulate | Target: Rs 571

We have marginally raised our earnings estimates for FY21-FY23E post the results. We assume normalized growth in volume over the next two years using FY20 as the base, which implies very high growth in CNG/PNG volumes and financials for FY22E versus FY21E.

There could be some risk to FY22E if the volume does not attain normalcy by 1QFY22. IGL management expects long-term volume growth of 9-10 percent

Sharekhan | Rating: Buy | Target: Rs 650

We have lowered our FY2022 earnings estimates to factor in lower CNG volumes due to COVID-19 related lockdown in April-May 2021 and have fine-tuned our FY2023 earnings estimates.

The recent under-performance of IGL (stock price up 5 percent in the last six months versus 71 percent rise in stock price of Gujarat Gas) provides an opportunity to invest in the stock as the long-term growth outlook remains intact and the same has been well appreciated by the street historically.

At 09:20 hrs Indraprastha Gas was quoting at Rs 531.50, up Rs 19.05, or 3.72 percent on the BSE.

The share touched a 52-week high of Rs 594.85 and a 52-week low of Rs 364.30 on 18 February, 2021 and 13 October, 2020, respectively.

Currently, it is trading 10.65 percent below its 52-week high and 45.9 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.