Emkay Global Financial has given Buy recommendation for Indraprastha Gas with a target price of Rs. 450 in its research report issued on May 19, 2022

Emkay Global Financial’s report on Indraprastha Gas

IGL has faced multiple headwinds, including rising APM gas prices and shortfall, which led to margin concerns. Aggressive RSP hikes, in response, have led to worries about CNG economics and demand outlook amid EV-led developments in Delhi. Q4FY22 results were largely stable with 14% yoy volume growth, despite a ~Rs15/kg CNG RSP hike since Oct’21 and omicron. EBITDA/scm also held up at Rs7.2. Management’s guidance of a 3-year volume CAGR of 13% and Rs7-8/scm EBITDA is also reassuring. The newly launched guidelines and pooled gas raise commodity risks in sourcing, though our bear case of sourced gas linked 100% to oil (term LNG) implies 30% CNG savings to petrol. Diesel usage is already restricted in NCR. We believe a viable case for CNG exists.


We retain our FY23E/FY24E EPS but lower our long term volumes and terminal growth rate in DCF, and raise CoE. We cut the TP by 30% to Rs450/sh, but maintain Buy. Correction in global gas prices (crude being stable) and volume strength are upside risks.

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