Motilal Oswal's research report on Indraprastha Gas
CNG and domestic PNG volumes for listed CGDs (IGL, MAHGL, GUJGA & ATGL) reported a 7% CAGR over the past four years, while gas production from nominated fields declined at 3% CAGR during the same period. The supply-demand imbalance is likely to continue, thereby increasing the proportion of expensive non-APM volumes in sourcing mix for CGDs. This should further lead to structural margin challenges going forward.
Outlook
For Indraprastha Gas (IGL), we estimate that the 20% penetration of EVs in sales of new CNG vehicles over the next three years would result in a decline in average CNG sales volume growth to 9% from 12% in our base case. Prospects of long-term high volume growth remain even bleaker for the company. Considering both these headwinds, we reiterate our Sell rating on the stock with a TP of INR340.
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