Despite reporting higher-than-expected quarterly earnings, Indraprastha Gas shares erased gains soon after opening higher.
At 9:21 am, shares were trading 1.3 percent lower at Rs 487.35 on the BSE. The stock had risen as much as 2 percent at open.
The gas company reported a net profit of Rs 400.5 crore in Q2 FY22, well above CNBC-TV18's poll estimate of Rs 338 crore. In the September quarter last year, Indraprastha Gas reported a profit of Rs 307.94 crore.
Net revenue from operations for the reporting quarter came in at Rs 1831.19 crore as compared to Rs 1,305.44 crore in the corresponding period last year. Revenue also surpassed expectations of Rs 1,595 crore.
Despite better-than-expected earnings, CLSA has downgraded its rating on shares of Indraprastha Gas to 'outperform' from 'buy' given the recent spike in spot LNG prices.
The brokerage has also cut its target price for the stock to Rs 540 from Rs 630 and cautioned that profitability remains a concern.
CLSA has cut its EPS estimates for FY22 By 2 percent and for FY23 by 16 percent.
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Further, Goldman Sachs said ‘sell’ the gas company’s shares as it believes volume growth might be fully offset by a lower margin. The brokerage expects flattish EBITDA growth in FY23.
However, Jefferies which has a ‘buy’ call on the gas company’s stock, said that the volume outlook for the near term will be helped by re-opening.
Jefferies has built in a near double-digit volume growth compounded annually over FY20-24 and expects Indraprastha Gas to maintain margin amid rising Administrative Price Mechanism gas costs ahead.