Reduce Indraprastha Gas; target of Rs 472: Dolat Capital Market

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26 Aug, 2025 12:21

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Dolat Capital Market's research report on Indraprastha Gas

IGL volume at 5.5 MMSCMD (down 16.4% YoY) with realizations of Rs 25.7 per SCM (down 7.9% YoY) was above our estimates. Volumes in CNG segment de-grew 20%, while Industrial/commercial segment was flat with strong performance in Domestic PNG segment of 21% YoY. EBITDA/scm grew 24% YoY at Rs 8/scm. Gas cost de-grew 26.3% in YoY and was flat sequentially to Rs 12.1/scm. Gross spreads were strong at Rs 13.6 per SCM. Maintenance of spreads at Gross and EBITDA levels will be the key monitorable to be watched out for. Volumes for IGL have recovered to 80% Pre Covid levels with Industrial volumes recovering 100%, domestic PNG volumes at 120%, CNG volumes at 80% and commercial volumes at 40%-50% of Pre Covid levels. It is expected that by Q3FY21E avg. sales will surpass last year's sales. Volume growth outlook for the long term looks good and we believe that IGL should be able to maintain double-digit volume growth trajectory driven by CNG economics and expansion in regions like Rewari and Gurugram. IGL has got full rights of CGD operations in high potential Gurugram region which is a mature area, volumes should take some time to clock in as there can be a slowdown in capex.

Outlook

We continue to like the story considering the business dynamics of IGL. There can be some short term pressure on the stock price as there will be capex spent to the tune of Rs 20,000 mn in next 3 years, Covid Impact can decline revenues for FY21 before getting back to normal levels in FY22, and the hangover around the common carrier policy to be introduced by the regulator. Considering the run up in the stock, we recommend Reduce with a target price of Rs 472. (DCF Method).

For all recommendations report, click here

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