Buy This Mid Cap Gas Sector Stock For Rs 507 Target Price: The Current Market Value (CMP) of this stock is 418.50/share. The stock’s 52-week low was at Rs 321 on March 7, 2022. the 52-week high is 602.05 which was recorded on the 14th of September 2021. When the shares are bought at the current market rate considering the target price estimate into account, the stock will likely gain 22% over the next 12 months.
Returns in the last five years
The company’s stock over the last week has produced an 0.1 percent return. In the last 1 and three months, it has risen 18.99 percent and 13.32 percent, and 13.32%, respectively. However, in the past year, it posted an unfavorable return of 20.19 percent. Over the last three and five years, the stock has earned 27.09 percent and 67.15 percent positive returns, in both cases.
The robust volume rises more than doubled the revenue
Indraprastha Gas Limited’s total revenue increased by 155.7 percent YoY. 3,530 crore (+21.8 percent QoQ) due to the volume growing 48.4 percent YoY to 718 million SCM. In terms of segmentation, CNG’s revenue increased 177.3 percent YoY to 2,357cr. 2,357cr, with a 62.7 percent increase in the volume of 540 millimetric SCM. PNG’s revenue increased 107.2 percent YoY to 825 crores, with an increase in the volume of 17.1 percent YoY, to 178mn SCM. The increase was due to an increase in PNG volumes (+33.5 percent YoY). Within PNG, commercial/industrial volumes increased 19.9% YoY to 88.8mn SCM, whereas domestic volumes rose a slight 0.3% YoY to 43.8mn SCM.
Profits are up, but margins are is impacted by the higher cost of purchase
In Q1FY23, the gross profit grew 47.2 percent YoY to 1,023cr. 1,023cr. However, the gross margin dipped significantly by 21.4 percent YoY to 29.0 percent, mostly due to an increase in the cost of purchasing natural gas. In contrast, EBITDA rose a sharp 62.1 percent over the previous year, to Rs.618cr. However, EBITDA margins fell sharply by 10.1 percent YoY to 17.5 percent, due to the increase in expenditure by employees (+28.6 percent per year) and other costs (+29.1 Year-on-Year). Operating profit grew 75.5 percent YoY to Rs. 532cr. Adjusted profits after taxes (PAT) increased 72.3 percent YoY to 421cr. 421cr, up from Rs.244 at the end of Q1FY22. PAT margin decreased 577bps to 11.9 percent, however.
Diversifying your business
Indraprastha Gas Limited looking for ways to diversify its business into different areas. To do this it has started CNG sales through mobile fueling equipment (MRUs) and plans to increase its MRU footprint that supplies fuel in the form of CNG customers. It is working to convert the existing buses of state-owned transport companies to CNG. It also has a good credit score due to an enviable working capital position as well as a robust cash flow.
Buy at the price you want to pay, which is Rs 507
The brokerage company says “Indraprastha Gas Limited reported excellent operational results in the last quarter, which was accompanied by more volume growth than expected, aided by the expansion of its geographic footprint. While electronic vehicle (EV) sales may affect CNG volumes, however, the company intends to expand into the electric vehicle segment through the establishment of 50 swapping stations for batteries. Additionally, Indraprastha Gas Limited is working with state governments in order in order to convert their fleets into CNG. Therefore, we have optimism about the business and reiterate our Buy rating for the stock with a roll-forward target price of Rs. 507 based upon SOTP methodology.”
The stock was sourced from the report of the broker Geojit. The author and the Brokerage House do not account for any losses incurred by choices based on this report.