Neutral Indraprastha Gas; target of Rs 520: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Indraprastha Gas

Indraprastha Gas (IGL) reported EBITDA ahead of our estimates. This was led by better-than-estimated volumes (CNG volumes now 8% above pre-COVID peak) and higher-than-estimated EBITDA/scm (INR8, primarily supported by a CNG price hike of INR1.8/kg during the quarter). With an overwhelming quarterly performance, the challenges ahead for IGL are overwhelming as well: 1. The recent excise duty cut on petrol and diesel has reduced savings of CNG to liquid fuels. As highlighted in our report, Warming up to the winter ahead… Oil price rally may strengthen, although temporarily, we maintain our stance on the normalization of Brent prices by end-FY22. Falling Brent prices would lower savings, thereby impacting volume growth.

Outlook

We revise up our FY22E EPS by 29% on the back of the outperformance in 2QFY22 and factoring the complete pass-through of increase in APM gas price by the company for 2HFY22. The stock trades at around 27x/23x FY23E SA/consol. EPS. We value the stock at 24x Dec’23E EPS to arrive at Target Price of INR520. We maintain Neutral on the stock. The sustainability of Brent price at current levels presents an upside risk to our call with regard to both margins and volumes.

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