Motilal Oswal's research report on Indraprastha Gas
IGL reported a beat on our EBITDA estimate, although volumes were strong YoY. Total volumes stood at 7.7mmscmd (+14% YoY), with CNG volumes at 5.7mmscmd (+16%) and PNG volumes at 2.1mmscmd. EBITDA/scm stood at INR7.2 (est. INR6.2). Aggregators account for 30-40% of total CNG sales for IGL. The onslaught of EVs may challenge volume growth in the medium-to-long term. APM gas price has been revised for 1HFY23 and stands at USD6.1/mmBtu – the highest since the adoption of the gas pricing formula in CY14. Moreover, there is likely to be a further increase in APM gas prices in 2HFY23E. OMCs are also demanding a higher single-digit commissions on CNG sales, while the recent change in allocation policy may limit access to low cost APM gas for priority sector sales.
Outlook
The stock trades at 19x/24x FY24E standalone/consolidated EPS. We value the stock at 18x FY24E standalone EPS and add value of its investments to arrive at our TP of INR412. We maintain our Neutral rating on the stock.
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