Buy Indraprastha Gas, target Rs 394: Nirmal Bang Institutional Equities

Nirmal Bang Institutional Equities has a buy call on Indraprastha Gas Ltd. with a target price of Rs 394. The current market price of Indraprastha Gas Ltd. is Rs 255.0 Time period given by the brokerage is a year when Indraprastha Gas Ltd. price can reach defined target.
Indraprastha Gas Ltd., incorporated in 1998, is a large-cap company with a market cap of Rs 17706.52 crore.


Investment rationale by Nirmal Bang
Indraprastha Gas (IGL) reported earnings of Rs1,747mn for 4QFY18, up 5% QoQ and 30% YoY. Earnings growth was driven by: 1) Expansion in EBITDA from Rs5.44/scm in 3QFY18 and Rs4.87/scm in 4QFY17 to Rs6.05/scm, up 24% YoY and 11% QoQ. 2) Increase in CNG sales volume from 328mn scm in 4QFY17 to 358mn scm in 4QFY18, up 9% YoY. 3) Rise in PNG sales from 108mn scm in 4QFY17 to 124mn scm in 4QFY18, up 15% YoY. However, the growth in earnings was capped by: 1) Increase in depreciation and amortisation expenses from Rs244mn in 4QFY17 to Rs470mn in 4QFY18, up 93% YoY. 2) Decline in other income from Rs326mn in 3QFY18 to Rs267mn in 4QFY18, down 18% QoQ. We have retained Buy rating on IGL with a target price of Rs394 based on 30xFY20E earnings.