Motilal Oswal Maintains 'Buy' on Indraprastha Gas Amid Rising Costs and Volume Growth
Motilal Oswal retains a 'Buy' rating on Indraprastha Gas, targeting Rs 220, reflecting a 40% potential upside. The firm anticipates strong earnings growth driven by increased compressed natural gas volumes and expansion in domestic piped natural gas connections despite a 25% rise in gas procurement costs.
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Motilal Oswal has set a target price of Rs 220 for Indraprastha Gas, indicating a 40% upside. The company reported a 6% increase in total gas volumes to 9.7 million metric standard cubic metres per day in Q4 FY26, exceeding estimates.
Compressed natural gas volumes rose 5.5% year-on-year, while domestic and industrial piped natural gas volumes surpassed projections by 19% and 7%, respectively. Earnings before interest, taxes, depreciation and amortisation reached Rs 420 crore, 51% above expectations, despite a 15% decline year-on-year.
The firm projects 10% to 13% growth in compressed natural gas volumes for FY27, supported by the government's PNG Drive 2.0 program. However, rising gas procurement costs, up 25% due to geopolitical factors, have pressured margins.
Operational challenges include a 20% reduction in supply to industrial customers and sluggish growth in Delhi. Motilal Oswal remains optimistic about future performance, citing potential growth from inactive users.
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