250% Dividend Soon: PSU Stock Below Rs 450 To BUY, Natural Gas Share IGL Gets Rs 470-490 Target

Brokerages have recommended ADD or BUY on PSU company, Indraprastha Gas which is a leading natural gas producer including CNG and PNG suppliers, despite the company reporting a sequentially weak quarter. Analysts said that IGL's earnings were hit by a jump in operating expenses, but the volume growth is in line. While Indraprastha's FY25E volume and EBITDA guidance remain intact.

IGL is set to pay a final dividend of 250% for FY24 ahead.

This natural gas stock stood at Rs 444.95 apiece, up by 2.4% on May 14 with a market cap of Rs 31,146.54 crore on BSE. The stock is nearing its 52-week high of Rs 501.35 apiece.

In Q4FY24, the company's consolidated PAT dipped to Rs 433.79 crore versus Rs 476.62 crore in Q3FY24, while it was up from Rs 397.51 crore. Meanwhile, revenue stood at Rs 3,964.42 crore in Q4FY24, slightly higher from Rs 3,920.41 crore in Q3FY24, but was down from Rs 4,056.44 crore revenue witnessed in Q4FY23.

Last week, IGL also declared a final dividend @ 250% i.e. Rs.5 per share (face value of Rs.2/-
each) for the financial year 2023-24, subject to the approval of shareholders in the ensuing Annual
General Meeting.

Earlier, for FY24, the company delivered a dividend of 200% amounting to Rs 4 per share.

Accordingly, Indraprastha Gas will be delivering a total of 450% dividend valuing to Rs 9 per share.

BUY IGL Share Price:

JM Financial On Indraprastha Gas:

IGL's 4QFY24 standalone EBITDA was INR 5.2bn, significantly lower than JMFe/consensus of INR 5.8bn/INR 6.1bn due to lower EBITDA margin at INR6.6/scm (vs. JMFe at INR 7.0/scm) driven by a jump in opex despite higher gross margin. However, volume was largely in line with JMFe at 8.7mmscmd, but the mix was inferior as CNG volume was lower than JMFe and was offset by higher PNG volume. Hence, PAT at INR 3.8bn was also lower vs. JMFe/consensus of INR 4.0bn/INR 4.2bn. The board approved a dividend of INR5/share; this takes the total FY24 dividend to INR 9/share (or 36% payout).

We maintain BUY (unchanged TP of INR 470) on valuation grounds and due to IGL's: a) decent pricing power, and b) steady volume growth story based on its existing lucrative NCR market and expansion into new, lucrative nearby cities and intercity traffic. At CMP, IGL is trading at FY26 P/E of 13.1x and FY26 P/B of 2.8x.

Centrum on Indraprastha Gas:

Despite EV-related challenges and the declining rate of CNG-driven DTC buses, management remained confident of healthy volume growth in FY25E with average volumes slated at 9.5mmscmd backed by rising CNG sales in new GAs and an increase in industrial volumes. Also, EBITDA/scm guidance has been widened to Rs7.0-8.5/scm. We have considered EBITDA/scm for FY25E/FY26E at Rs8.0/scm. We expect Delhi EV policy impact to be felt gradually looking at the current CNG conversion rate. Based on our marginally revised estimates and rolling forward the DCF valuations, we upgraded the stock from REDUCE to ADD with a revised SOTP-based TP of Rs487 (earlier Rs431).

As per Centrum, IGL has experienced monthly CNG conversions at 15,500/month, up ~11% YoY. Although, Delhi, Gautam Buddha Nagar, and Ghaziabad account for 90% of its overall volumes, other GAs are growing at a faster clip with a lower base and are expected to aid volume growth. During FY24, the company added 90 CNG stations, 3.3lakh PNG connections, and 187km steel pipeline and the momentum is expected to continue in FY25E with capex slated at Rs18bn p.a.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.