Dolat Capital expects 32 pc gains in Indraprastha Gas

MUMBAI: Dolat Capital has reiterated “Buy” recommendation on Indraprastha Gas (IGL) after the company increased piped natural gas price by Rs 0.93 per unit thereby taking the selling price to Rs 16.85 per unit. The brokerage expects 32 per cent upside in the stock.

“IGL took hike in CNG on June 17 and kept PNG hike on hold to maintain cost competitiveness against cooking gas cylinders. With government increasing the cylinder prices by Rs 35, IGL had a strong case to increase the PNG prices. With this, IGL showcases the demand strength for PNG even at increased prices.

At CMP of Rs 266, the stock trades at 13.0x FY11E and 11.6xFY12E earnings. In our opinion, IGL has left behind all overhangs (increase in gas cost and ability to raise selling price for CNG & PNG). Considering the growth potential in NCR and strength of business model, IGL has a strong case for valuation rerating. We reiterate “BUY’ with a DCF based price target of Rs 351 over a period of 12 months, at which it would trade at 15.3 x FY12E earnings,” the report said.

At 11:40 am, the stock was at Rs 284.35, up 6.68 per cent or Rs 17.80 on the BSE. It touched a high of Rs 291.70 and low of Rs 267 on volume of 13.93 lakh shares.