Emkay Global Financial has given Buy recommendation for Indraprastha Gas with a target price of Rs. 635 in its research report issued on Sep 29, 2021

Emkay Global Financial’s report on Indraprastha Gas

IGL’s stock price corrected 13% in the last 15 days as economics vs. margin concerns resurfaced post the recent spike in global gas prices, and its impact on APM rates going ahead. PNGRB also sought comments on open access, though it was mostly a follow-up. Despite our bullish stance on gas prices, we find comfort in IGL’s retail model and past trends. Public-commercial vehicles in NCR are mandated to run on CNG, while 4W conversions and CNG growth have a negative 10 year correlation with petrol economics. We estimate CNG RSP to rise by Rs7/Rs14 per kg in Oct’21/Apr’22, assuming USD3/USD5.5 APM. But in Apr’22, CNG would still be ~50%/30% cheaper than petrol/diesel (at current Brent), similar to 9MFY20, when CNG volumes still grew by 12%.


In our view, IGL’s expansion in contiguous northern areas and widening of the pollution ban imply steady growth and ~Rs8/scm EBITDA seems sustainable. We reiterate Buy on IGL with an OW stance and a DCF-based Sep’22 TP of Rs635 (unchanged).

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