Sell Indraprastha Gas; target of Rs 345: Motilal Oswal

Motilal Oswal is bearish on Indraprastha Gas has recommended sell rating on the stock with a target price of Rs 345 in its research report dated May 15, 2023.

Broker Research

May 16, 2023 / 23:13 IST

sell

26 Aug, 2025 12:21

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Motilal Oswal's research report on Indraprastha Gas

Indraprastha Gas (IGL) reported in-line EBITDA of INR4.7b in 4QFY23, with EBITDA/scm at INR6.3 (down 13% YoY/up 9% QoQ). Volumes increased 7% YoY to 8.3mmscmd. The management expects volumes to reach 9mmscmd in FY24, driven primarily by growth from new GAs. CNG conversions are also expected to increase, driven by the stability in CNG prices and the introduction of new CNG vehicle models by OEMs. The management highlighted that buses account for ~20% of CNG volumes (DTC/DIMTS buses accounting for half of it), while taxis & three wheelers account for 30% of volumes. Hence, aggressive EV policies by the Delhi government may challenge volume growth in the medium-long term. Although the management has guided for an EBITDA/scm of INR7-8, we model a lower EBITDA/scm of ~INR6 in our base case, considering likely margin pressure due to high proportion of industrial component in incremental volumes.

Outlook

We value the stock at 14x FY25E adj. EPS and add value of JV at 25% holding company discount to arrive at our TP of INR345. We reiterate our sell rating on the stock. Stricter mandate on the adoption of natural gas by industries/ vehicles remains the key risk to our call.

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