Buy Indraprastha Gas; target of Rs 190: ICICI Securities

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Record volumes: IGL posted record gas sales of 10.1mmscmd in Q2FY27, driven by an 8% YoY increase in overall volume, with CNG up 9% and PNG up 8%.
  • Margin recovery: Despite negative EBITDA in Q2FY27 due to high gas costs, management expects EBITDA margin to recover to INR 6-7/scm in FY28, driven by stronger CNG penetration, regulatory changes, and new area momentum.
  • Gas sourcing and costs: IGL is seeking additional term volumes from existing suppliers and reviewing its sourcing strategy, which could help reduce dependence on spot LNG and ease margin pressure.
  • Regulatory support: The government's focus on the CGD sector, as evident from PNG 3.0, is expected to accelerate PNG penetration and last-mile connectivity, supporting IGL's growth.

Thesis Validation Checklist

To validate the investment thesis, investors should monitor:

  • Volume growth: IGL's ability to sustain double-digit volume growth, driven by CNG penetration and new area momentum.
  • Margin recovery: The company's ability to recover EBITDA margins to INR 6-7/scm in FY28, driven by stronger CNG penetration, regulatory changes, and new area momentum.
  • Gas sourcing and costs: IGL's ability to reduce dependence on spot LNG and ease margin pressure through its sourcing strategy.
  • Regulatory support: The government's continued focus on the CGD sector and its impact on IGL's growth.