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IGL jumps 4% on Q4 earnings: Should you buy, sell or hold?

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Indraprastha Gas is the steadiest volume-growth story in the city gas space and its recent underperformance relative MGL and Gujarat Gas provides a good entry point, CLSA said.

IGL jumps 4% on Q4 earnings: Should you buy, sell or hold?
Indraprastha Gas (IGL) shares rallied over four percent in early trade on Monday after the company reported its earnings for the fourth quarter of fiscal 2021.
The country’s largest CNG distribution company posted a net profit of Rs 331 crore in Q4FY21 as against Rs 334.87 crore in the quarter ended December 2020. The company’s revenue rose 7.22 percent to Rs 1,710.32 crore from Rs 1,595.09 crore, QoQ.
Overall sales volume was 614 million standard cubic meters in Q4FY21.
Company Board recommended a 180 percent dividend. This translates to a dividend of Rs 3.6 per share (face value of Rs 2 each) for the financial year 2020-21, subject to the approval of shareholders in the ensuing Annual General Meeting.
Here’s what brokerages have to say on the company’s stock and Q4 earnings:
CLSA
IGL is the steadiest volume-growth story in the city gas space and its recent underperformance relative to MGL and Gujarat Gas provides a good entry point. It is also a good post-Covid-19 re-opening play with the rebound in mobility, CLSA said.
To build in the impact of the recent lockdowns CLSA cuts its FY22 EPS by five percent but raises FY23 by two percent and raises target price to Rs 630 per share from Rs 615 earlier. As this offers 23 percent upside, CLSA upgrades its rating to ‘buy’ from ‘outperform’.
Nomura
The Q4 was a miss, but overall good numbers. The margin is likely to be more than Rs eight/scm in H1FY22 and expect city gas companies to pass the bulk of sharp domestic gas price hike in H2FY22, Nomura said.
It sees upside risks to FY22-23 earnings. It maintains a ‘buy’ call with a target price of Rs 650 per share.
Macquarie
IGL's FY21 EBITDA stood largely flat, despite a 17 percent YoY drop in volumes, Macquarie said. It raised the FY23 EPS estimate by six percent on a better margin outlook. It expects faster recovery post the second COVID wave.
The brokerage house maintains an ‘outperform’ call and raised the target price to Rs 600 per share from Rs 550 earlier.
Citi
The underlying performance was better, with volumes ahead of estimates. The volumes are back above pre-COVID levels, Citi said. It has a ‘buy’ rating with a target of Rs 640 per share.
Morgan Stanley
The brokerage has an ‘overweight’ rating with a target of Rs 650 per share.
IGL reported an earnings beat on better volume growth and cost control, Morgan Stanley said while it sees upside risks to earnings growth ahead.
Motilal Oswal
IGL could increase its sales volume from new areas such as Rewari, Karnal, and Muzaffarnagar; Haryana City Gas; and the newly-awarded Gas in the 10th round — a) Kaithal (Haryana), b) Ajmer, Pali, and Rajsamand (Rajasthan), and c) Kanpur, Fatehpur, and Hamirpur (Uttar Pradesh), Motilal Oswal said.
The introduction of EVs could dent CNG demand over the long term. Delhi’s recently revised EV policy is directed at 2W and 3W, thus impacting 3W CNG volumes (which constitute 10 percent of total volumes). The management expects EV buses to ply on the roads of Delhi over the next two-three years, challenging current total volumes of 25 percent used by CNG buses, it added.
It maintained a ‘neutral’ rating with a target price of Rs 480 per share.
At 10:30 am, the shares of Indraprastha Gas were trading five percent higher at Rs 538.05 apiece on the BSE.