650% Dividends In FY23: Vaishali Parekh Recommends 'Buy' On This Natural Gas Stock, Expect 16% Returns Ahead

Leading supplier of CNG, PNG, and LNG in the country, Indraprastha Gas (IGL) witnessed a strong rally on Tuesday after the Oil Ministry revised natural gas prices for October 2023. Indraprastha Gas which is among the high dividend-paying oil & gas stocks, surged by 3% during the day. More upside is seen in this natural gas stock as Vaishali Parekh, Vice President - Technical Research of Prabhudas Lilladher recommends 'Buy' for a target price of Rs 535.

On BSE, the stock ended at Rs 461.85 apiece up by 1.7% with a market cap of Rs 32,329.54 crore on October 3rd. During the trading hours, the stock zoomed by 2.96% with an intraday high of Rs 467.75 apiece.

The share price of Indraprastha Gas has a potential of nearly 16% upside in the coming days.

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher in her technical pick note said, "The stock has made a higher bottom formation pattern in the daily chart, taking support at the significant moving average of 200 DMA, which lies at 454 levels, and has regained significantly to indicate a positive bias."

She added, "We anticipate a further rise from here on to scale up to 535 levels. With the chart looking attractive and with good volume activity seen in recent times, we recommend a buy in this stock for an upside target of 535, keeping a stop loss of 438."

In FY23, the company distributed the highest-ever total dividend of 650% amounting to Rs 13 per share having a face value of Rs 2/- each). The dividend payout was to the tune of Rs 910 crore to shareholders.

At the current market price, the stock has a dividend yield of 2.81%.

IGL is backed by strong government-owned promoters like GAIL and BPCL. It plans to provide natural gas in the entire capital region.

Looking ahead, in the annual report of FY23, IGL's chairman RK Jain said, "Your Company is looking beyond gas and has diversification plans in the areas of renewable energy. The company is exploring opportunities to set up Solar Power and Green hydrogen generation plants. The Company is also setting up EV Charging and battery swapping facilities."

Last week, for gas produced from discoveries in deepwater, ultra-deepwater, high-pressure and high-temperature areas, the price ceiling has been decided to $9.96 MMBTU on GCV for October month. Meanwhile, the Centre kept the ceiling on gas produced by ONGC and Oil India from their nomination fields unchanged at $6.50 per MMBtu on a GCV basis for the same period.

However, the government has hiked the prices of natural gas which are produced in domestic fields, by at least 7% from the entire October month. As per the notification of the Petroleum Planning & Analysis Cell, the price of domestic natural gas for October 1 to 31st, is hiked to $9.20 per MMBtu on a gross calorific Value (GCV) basis. Earlier, the price was $8.6 per MMBTU.

After the price revision in natural gas, IGL's peers Mahanagar Gas has reduced its CNG price by Rs 3/Kg and Domestic PNG (DPNG) by Rs 2/ SCM in and around Mumbai. It will be keenly watched if IGL follows suit.