Buy This Debt-Free PSU Energy Stock, Robust Topline Growth Of 94% Reported: Top Brokerage

Leading brokerage firm Keynote has given a buy rating to the stock of Polycab India Ltd (PIL). The company has reported a strong topline growth of 94%, and volume growth of 12% on a YoY basis. IGL has a strong balance sheet, and they are one of the fastest-growing CGD company. Based on the expansion plans, we expect IGL's growth trajectory for the next decade to be completely different from the last decade.

Stock To Buy: Target Price

The Current Market Price (CMP) of Indraprastha Gas Limited (IGL) is around Rs. 408. Keynote has estimated a Target Price for the stock at Rs. 555. This stock has the potential to give a 36% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 29,575 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 408
Target Price	Rs. 555
Potential Upside	36.00%
52-week high share price	Rs. 513.45
52-week low share price	Rs. 321

Strong Volume Growth

In Q2 FY23, IGL posted a sales volume of ~744 MMSCM, which grew by ~12% & 4% on a YoY & QoQ basis, respectively. Within the product mix, the company did ~560 MMSCM in CNG, ~92 MMSCM in Industrial & Commercial, 46 MMSCM in Domestic & ~46 MMSCM in Third Party Sales, which grew by 15%, 1%, 11% & 0% on a YoY basis, respectively. Due to higher gas prices, we expect volume growth to take a hit, which we expect to get normalized once APM prices come back to its average level of $3.1 per MMBTU.

Stock Upside

According to Keynote, "Indraprastha Gas Limited (IGL) In contrast, it posted a de-growth in EBITDA on a YoY basis (-1%). This occurred due to higher gas costs leading to a ~23% contraction in gross margins on a YoY basis (Note: FY21 & H1FY22 saw abnormally high margins, which were not sustainable, normalized gross margins for IGL is ~40%). We expect the energy crisis to be a short-term phenomenon; we expect IGL to start posting normalized numbers from H1 FY24. We maintain Buy on IGL with a target price of Rs. 555, valuing it at 21x FY24E earnings."

Disclaimer

The above stock was picked from the brokerage report of Edelweiss. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.