1 hr ago
Motilal Oswal Sees 27% Upside for Indraprastha Gas
Indraprastha Gas sells compressed natural gas and piped natural gas.
Its share price has fallen because gas became more expensive and the rupee weakened.
Motilal Oswal believes the company’s profit margins may have reached their lowest point.
Recent increases in CNG and PNG prices could help the company earn more from each unit sold.
Delhi’s plans to encourage electric vehicles could reduce CNG use over time.
However, the brokerage expects this change to happen gradually rather than suddenly.
CNG sales outside Delhi NCR are growing quickly and are supporting the business.
Motilal Oswal expects IGL’s volumes, earnings and profits to grow in the coming years.
It therefore kept its Buy rating and projected a Rs 195 share price.
Motilal Oswal retained its Buy rating on Indraprastha Gas and set a Rs 195 target price, implying about 27% upside.
Higher gas costs and a weaker rupee have pressured IGL’s margins and contributed to a roughly 10% share-price correction in four months.
The brokerage believes Q1FY27 EBITDA margin of Rs 3.4 per scm marked the trough, with recent CNG and PNG price increases expected to support margins.
Delhi’s EV Policy 2.0 may gradually reduce CNG demand, but the brokerage estimates three-wheeler electrification will affect volumes by 0.6% annually.
CNG volumes outside Delhi NCR have grown more than 20% year-on-year and now represent about 15-20% of IGL’s total volumes.
- Who
- Indraprastha Gas Limited and Motilal Oswal.
- What
- Motilal Oswal retained its Buy rating on IGL and projected about 27% upside to Rs 195 per share.
- Where
- The key policy risk is in Delhi, while growth is coming from markets outside the Delhi NCR.
- When
- The assessment covers recent months and forecasts through FY27-FY28; restrictions on certain new vehicle registrations are expected from January 2027.
- Why
- Higher gas costs and currency weakness hurt margins, but price increases and non-Delhi growth may support recovery; Delhi’s EV policy remains a longer-term risk.
Recovery and Growth Case
Policy and Cost Risks
Margins
Recovery and Growth Case
Motilal Oswal believes Q1FY27 margins marked the low point and that CNG and PNG price increases can support margins from Q2FY27.
Policy and Cost Risks
Higher Brent crude prices and a weaker rupee have increased input costs and squeezed margins.
Delhi EV transition
Recovery and Growth Case
The brokerage estimates three-wheeler electrification will reduce CNG volumes gradually, with an impact of about 0.6% annually.
Policy and Cost Risks
Delhi’s EV Policy 2.0 and related directions could structurally reduce CNG vehicle use, with restrictions on certain new registrations from January 2027.
Growth outlook
Recovery and Growth Case
CNG volumes outside Delhi NCR have grown more than 20% year-on-year, and the brokerage expects IGL volumes, EBITDA and profit to grow through FY28.
Policy and Cost Risks
Delhi remains a significant exposure, and the longer-term shift toward electric mobility could weaken demand in the company’s core market.
Key facts
- Brokerage rating
- Motilal Oswal retained its Buy rating.
- Target price
- Rs 195 per share, implying around 27% upside from current levels.
- Recent share performance
- IGL shares corrected around 10% over the past four months.
- Q1FY27 EBITDA margin
- Rs 3.4 per scm, described by the brokerage as the trough.
- CNG price increase
- A recent Rs 3.9 per kg increase is estimated to add Rs 1.4-1.5 per scm to EBITDA.
- Volume outlook
- Motilal Oswal expects volumes to grow at a 7% CAGR between FY26 and FY28.
- Valuation
- The stock trades at about nine times estimated FY28 earnings, excluding joint-venture value.
Quotes
Motilal Oswal
Brokerage house providing the IGL research report
“CNG volume growth remains broad-based—ex-Delhi NCR, consistently rising 20%+ YoY.”
financialexpress.com
“We estimate 0.6% p.a. CNG volume impact from 3-Wheeler electrification.”
financialexpress.com
Sources
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