Motilal Oswal is bullish on Indraprastha Gas has recommended buy rating on the stock with a target price of Rs 381 in its research report dated December 17, 2018.
Motilal Oswal's research report on Indraprastha Gas
IGL’s volumes grew ~13% YoY in 1HFY19, supported by a healthy rate of vehicle conversions to CNG (at ~4,000 4Ws per month). Management expects volume growth to sustain over the near-to-medium term. Notably, ~5,000 CNG LCVs were added in FY18. Customers are likely to shift toward CNG-fitted engines due to a rise in the cost of diesel LCVs post BS-VI implementation. Government measures to curb pollution (e.g. diesel CVs now are restricted from entering Delhi) are providing added support. OEMs, too, are likely to roll out more CNG-fitted commercial transport vehicles, which bodes well for volume growth.
Outlook
We cut our P/E multiple by 10% from 27x to 24.3x to account for the threat that EVs may pose over the longer term. Valuing IGL at 24.3x Dec’21E EPS and adding the contribution from JVs, we reiterate Buy with a TP of INR381.
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