Indraprastha Gas - Long-Term Volume Growth Outlook Intact Despite Near Term Concerns: HDFC Securities

HDFC Securities Institutional Equities

The Indraprastha Gas Ltd. stock price has rallied ~14% over the last three months and outperformed the Sensex by ~5%. We maintain our Buy recommendation on the company with a target price of Rs 615, given-

1. healthy volume growth of ~10% CAGR over FY24-29E,

2. higher margins supported by higher allocation of gas from the high-pressure, high-temperature fields to the priority sector, and

3. a strong portfolio of new geographical areas ensuring volume growth visibility.

We anticipate volume growth to be led by the company’s focus on the expansion of its city gas network in existing and new GAs and competitive CNG price versus petrol/diesel.

While the Vahan data for its core GAs for FY25 year-to-date indicates only a ~2% YoY growth in new compressed natural gas vehicle registrations, we believe CNG volume growth levers are in place to achieve 7.2% CAGR volume growth over FY24-26E.

We reiterate a Buy rating on IGL with a target price of Rs 615.

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