Citi Research maintained its 'buy' stance on IGL while increasing the target price and upgrading its earnings estimates amid falling oil prices.
Citi's target price for the company has risen 9% to Rs 250 in light of falling Brent crude prices. It added that the price of 65% of IGL's gas portfolio is linked to oil prices (comprising all its APM gas & NWG and a portion of its term LNG).
Additionally, the hike in CNG prices and the strong performance of the rupee over the last week because nearly all of IGL's gas supplies are $-denominated have led the brokerage to hold that the company will meet its margin guidance.
At a base price of $65/barrel for oil, the research firm forecasted an estimated Ebidta range of Rs Rs6.5-7/scm over financial years 26-28E, in turn leading to earnings estimates rising 4-15% for financial years 26-28E.
The brokerage also noted that IGL's overall volume growth would remain healthy given that the policies are initiated to control pollution in Delhi, CNG station networks are expanded, there is development of a CNG ecosystem around Delhi, OEMs zero in on CNG, there is acceleration in new domestic PNG connections, and finally, industries are being mandated to convert to cleaner fuels. Additionally, IGL's 50% stakes in MNGL & CUGL should continue to boost consolidated earnings.
The IGL share price rose as much as 1.77% to Rs 210 apiece, the highest level since Jan 10, 2015. It pared gains to trade 0.48% lower at Rs 205.10 apiece, as of 10:20 a.m. This compares to a 0.35% decline in the NSE Nifty 50 Index.
The share price has fallen 1.01% on a year-to-date basis and is down 7.11% in the last 12 months. The relative strength index was at 72.18.
Out of 35 analysts tracking the company, 20 maintain a 'buy' rating, six recommend a 'hold,' and nine suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 0.2%.
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