Sharekhan has given Buy recommendation for Indraprastha Gas with a target price of Rs. 650 in its research report issued on Feb 10, 2021
Sharekhan’s research report on Indraprastha Gas
Q3FY2021 operating profit stood at Rs. 501 crore, up 27.8% y-o-y and 2% ahead of our estimates as beat in EBITDA margin at Rs. 8.7/scm (up 36.7% y-o-y) was partially offset by slight miss in gas sales volume at 6.3mmscmd (up 13.8% q-o-q). Sharp recovery in CNG volume to 91% of pre-COVID-19 level to 4.5mmscmd, while domestic and I/C PNG volume grew by 14% and 2% y-o-y respectively. Robust gross margin at Rs14.6/scm (up 24.1% y-o-y). High EBITDA margin to sustain over FY2022-FY2023E, given ability to pass any rise in APM gas price; volume growth (guidance of 12% CAGR over FY20-FY24E) to outpace the industry’s growth led by high gas demand in in existing GAs and ramp-up volume at new GAs.
We maintain Buy on Indraprastha Gas Limited (IGL) with a revised PT of Rs. 650 given strong earnings growth outlook and high RoE of 22%-23%. Robust volume growth track-record justifies premium valuation of 24.4x its FY2023E EPS.
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