Indraprastha Gas slumps 5% on subdued growth in Q1, EV adoption sparks concern

Jefferies highlighted that the adoption of electric vehicle in the NCR region poses a medium-term risk to 30 percent of the company’s overall volume

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Shares of Indraprastha Gas Ltd (IGL) slumped 5 percent on July 24 as the company’s growth was subdued during the April-June quarter of FY24. Even as brokerage firms recommended ‘buying’ IGL shares, adoption of electric vehicles is being seen as a looming threat to the company’s volume in the medium to long term.

The company reported a 4 percent on year rise in net profit to Rs 438.5 crore during Q1FY24 whereas revenue from operations was up 7 percent YoY at Rs 3,406.98 crore.

At 10:33 am, shares of the gas distribution company were trading 5.2 percent lower at Rs 469.45 on the BSE.

Citi highlighted that EBITDA during the quarter under review was in line with soft volumes offset by higher margin. The brokerage firm has a ‘buy’ rating on the stock with a target price of Rs 560.

Meanwhile, Jefferies has ‘buy’ recommendation on the stock with a target price of Rs 565. The brokerage firm pointed out that earnings in the near term are supported by expanding margin on feedstock cost relief.

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However, adoption of electric vehicle in the NCR region poses a medium-term risk to 30 percent of the company’s overall volume, Jefferies cautioned.

CLSA said that the volume growth was at multi-year low led by a mere 1 percent YoY growth in CNG.

CNG forms a major chunk of the overall volume for IGL. For the quarter ended June, the company’s volumes in the CNG business stood at 561.42 million scm in comparison to the overall volume of 746.19 million scm.

The brokerage firm has a ‘buy’ rating on the stock with a target price of Rs 600. However, CLSA sees a return of pricing power because of stable input costs along with robust volume growth. It believes pricing should enable 21 percent compounded annual growth in EPS over FY23-25.

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