Indraprastha Gas - Looking Beyond Near-Term Headwinds: HDFC Securities

HDFC Securities Institutional Equities

The Indraprastha Gas Ltd.'s stock price has rallied ~2% over the last three months and underperformed the Sensex by ~0.3%. We maintain our Buy recommendation on IGL with a target price of Rs 635, given-

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

2. healthy long-term volume growth of ~10% CAGR over FY24-29E, and

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

We anticipate volume growth to be led by the company’s focus on expanding its city gas network, especially in new GAs and competitive CNG price vs petrol/diesel.

While the Vahan data for its core GAs for FY25YTD indicates a ~3% YoY decline in new CNG vehicle registrations, we believe CNG volume growth levers are in place to achieve 8% CAGR volume growth over FY24-27E.

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