On Wednesday, BofA Securities revised its price target for Indraprastha Gas Ltd. (IGL:IN), reducing it to INR545 from INR600 while retaining a Buy rating on the stock. The adjustment follows Indraprastha Gas's second-quarter financial performance, which saw its EBITDA fall short of market expectations by 10%. The company reported an EBITDA of INR5.4 billion for the quarter.
Despite the EBITDA miss, Indraprastha Gas experienced a notable increase in volume growth. The total volumes rose by 9% year-over-year to 9.03 million standard cubic meters per day (mmscmd), with a 5% quarter-over-quarter gain. This growth was attributed to an increase across all segments.
However, the company's EBITDA margins declined to INR6.45 per standard cubic meter (scm) compared to INR7.40 scm in the previous quarter, primarily due to higher gas costs. Operational expenses saw a sequential decrease of 8% to INR5.47 scm.
In addition to the financial results, Indraprastha Gas announced an interim dividend of INR6.50 per share. BofA Securities has adjusted its EBITDA forecasts for fiscal years 2025-26 downwards by 18-20% after a reduction in the allocated APM gas for Compressed Natural Gas (CNG).
The firm has updated its income rating for Indraprastha Gas based on two key factors: robust volume growth, particularly in the National Capital Region (NCR (NYSE:VYX))/National Capital Territory (NCT) of Delhi and in new geographical areas, and the view that the threat posed by electric vehicles (EVs) is overstated. BofA Securities' revised analysis reflects these updated expectations and market conditions.
InvestingPro Insights
To complement the analysis of Indraprastha Gas Ltd. (IGL:IN) by BofA Securities, recent data from InvestingPro offers additional context for investors. Despite the reduced price target, IGL's financial health appears robust. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, suggesting a strong financial position that could provide stability amid market fluctuations.
The company's dividend history is particularly noteworthy. InvestingPro data reveals that IGL has raised its dividend for 6 consecutive years and has maintained dividend payments for an impressive 21 consecutive years. This consistent dividend growth aligns with the recently announced interim dividend of INR6.50 per share mentioned in the article.
While the article discusses a decline in EBITDA margins, InvestingPro data shows that IGL's revenue for the last twelve months as of Q2 2025 stood at $1.71 billion, with a gross profit margin of 25.64%. This indicates that despite margin pressures, the company maintains a significant profit cushion.
It's worth noting that InvestingPro's analysis suggests the stock may be in oversold territory based on its RSI, which could present an opportunity for investors following the recent price adjustments. However, the stock has experienced a significant price decline over the last three months, which aligns with the reduced price target from BofA Securities.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for IGL, providing a deeper understanding of the company's financial health and market position.
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