'Buy' This Energy Stock For 45.7% Return In 1 Year, As Recommended By HDFC Securities

A renowned brokerage firm, HDFC Securities has recommended investors to 'buy' Indraprastha Gas's stock with a potential upside of ~45.7%.

Target Price

The Current Market Price (CMP) of Indraprastha Gas (IGL) is Rs. 494. The brokerage firm sets a Target Price for the stock at Rs. 720, indicating a 46%, with a Target Period of 12 months (1 year). IGL's stock performance grew (absolute) by 16.7% upside in the last 12 months.

Stock Outlook
Current Market Price (CMP)	Rs. 494
Target Price	Rs. 720
1 year return	~46%

 

Company performance

Indraprastha Gas's Blended volume stood at 7.2mmscmd (+31.6% YoY, +36.1% QoQ). While CNG (+35.4% YoY), industrial/commercial (+26.1% YoY) and trading volumes (+ 34.6% YoY) remained robust, but domestic PNG (+3.9% YoY) volume saw a QoQ fall of 6.4%. Overall PNG volume has increased by 22% YoY, 15.9% QoQ. HDFC Securities estimate that the average CNG volume of the company will increase by 33% YoY in FY23E, while total volume is estimated to increase by 29% YoY.

Comments by HDFC Securities

According to HDFC Securities, "Sales volume drives profitability. We maintain our BUY recommendation on Indraprastha Gas (IGL) with a target price of Rs. 720, based on robust volume growth at ~18% CAGR over FY21-24E, regulatory support from the government to curb pollution in the Delhi/NCR region." The firm added, because of increased sales volume and higher than expected other income, IGL's Q2FY22 EBITDA has been 19% above their estimate, while PAT was 36% above.

About the company

Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). IGL plans to provide natural gas in the entire capital region. The company is augmenting its infrastructure to meet the increasing demand of CNG arising out of a growing number of CNG vehicles. IGL is already operating on the PNG front.

Disclaimer

The above stock has been picked from the brokerage report of HDFC Securities. 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.

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