Brokerage firm Motilal Oswal has reiterated a 'Buy' rating on Indraprastha Gas Limited, projecting a target price of ₹195. The analysis suggests the stock is currently undervalued relative to its historical performance and expected growth, with potential upside of roughly 27% from recent levels.
Motilal Oswal has maintained its positive outlook on Indraprastha Gas Limited (IGL), setting a target price of ₹195 per share. Based on the stock’s recent closing price of approximately ₹153.46, this target implies an upside potential of about 27%. The brokerage's report highlights that the current market valuation does not fully account for the company’s ability to generate steady earnings and volume growth over the coming years.
Valuation and Growth Outlook
The core of the brokerage's argument lies in IGL’s valuation. The report notes that the stock is currently trading below its one-year forward price-to-earnings (P/E) historical mean. To reach the ₹195 target, the brokerage calculates a standalone value based on 13 times December 2027 estimated earnings, while also assigning a value of ₹44 per share for the company’s joint venture interests in Maharashtra Natural Gas and Central U.P. Gas.
Motilal Oswal projects a stable financial performance for IGL, forecasting a compound annual growth rate (CAGR) of approximately 14% for both EBITDA and profit after tax between FY26 and FY28. Furthermore, the company is expected to see volume growth of 6-8% annually, supported by an estimated return on equity of 14-15%. For income-focused investors, the brokerage also highlights an estimated FY27 dividend yield of roughly 2.6%.
Risk Factors and Margins
While the brokerage is optimistic, the outlook depends on IGL’s ability to manage its unit economics effectively. The company’s profitability is closely tied to its EBITDA margins per standard cubic metre (scm). Fluctuations in gas procurement costs remain a primary risk, as any inability to pass these costs on to consumers could pressure margins.
Investors should also be aware of the wider industry context. The City Gas Distribution sector faces execution risks related to ongoing gas demand and the complexity of expanding infrastructure. Additionally, regulatory decisions regarding gas allocation and pricing policies can impact the sector's profitability. Whether IGL can meet the projected volume growth and maintain its unit margins in the face of these challenges will be critical factors to watch in the coming quarters.