InCred Equities downgrades Indraprastha Gas to ‘reduce’, cuts target price by 22% – here's why
₹419 from ₹539 earlier. The new target indicates a downside of 12 percent for the gas stock.According to Incred, the expected increase in gas costs driven by higher APM (Administrative Price Mechanism) prices and rising Henry Hub (HH) prices will offset the impact of lower LNG prices.
As a result, earnings per share (EPS) are projected to decline after peaking in FY25F.Moreover, the electric vehicle policy of the Delhi government poses a challenge, but a projected 9 percent compound annual growth rate (CAGR) in CNG vehicle sales is expected to drive a 7.4 percent CAGR in sales growth from FY24 to FY31F.Incred has valued the stock at 16.3x FY26F EPS to set its target price at ₹419, leading to a downgrade recommendation to REDUCE.Indraprastha Gas stock has been completely flat for the last one year, down 0.04 percent but has gained almost 14 percent in 2024 YTD, giving positive returns in 4 of the 6 months of the current calendar year. It jumped 7.5 percent in June so far, after a 5.8 percent fall in May.
Before that, the scrip advanced 8.9 percent in April and 1.1 percent in March after declining around a percent in February. In January 2024, the stock added 2.84 percent.Currently trading at around ₹475, the stock is just 5 percent away from its 52-week high of ₹501.35, hit on July 7, 2023.
Meanwhile, it has risen over 26 percent from its 52-week low of ₹375.80, hit on November 11, 2023.Delhi's EV policy impact: According to Incred, the Delhi government's electric vehicle initiatives, including the EV and EV 2.0 policies, aim to convert 3,200 DTC buses to electric by FY25F, affecting 13.3 percent of total CNG demand. The phased replacement of CNG vehicles, including 4,200 DIMTS buses, represents a significant transition,
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