IGL shares down 29% YTD; why brokerages retain positive ratings despite Q2 margin pressure

Shares of Indraprastha Gas Ltd (IGL) were trading 1.95 per cent higher at Rs 135.85 in Wednesday's trade. Despite the uptick, the stock remains down 29.23 per cent on a year-to-date (YTD) basis.

Following the company's September quarter (Q2 FY27) results, select brokerages have largely maintained their positive ratings on the counter but reduced their target prices.

Jefferies

Jefferies said IGL reported an EBITDA loss for the first time in its history due to higher gas costs. However, volumes grew 2 per cent, ahead of the global brokerage's estimates.

"Vol growth is at a 7-qtr high and should improve going forward, as the drag from CNG bus retirements in Delhi is behind. We build 7 per cent vol CAGR over FY26-29E," the brokerage said.

Jefferies added that dependence on spot gas would remain high until the West Asia conflict is resolved, weighing on margins. It cut its FY27 EPS estimate by 65 per cent to factor in the earnings miss and margin pressure.

The brokerage maintained its 'Buy' rating on IGL, citing cheap valuations, but lowered its 12-month target price to Rs 160 from Rs 170 earlier. The revised target is based on 12 times forward September 2028 P/E.

UBS

UBS said IGL's EBITDA margins slipped into negative territory in Q2 FY27, primarily due to gas sourcing challenges. However, UBS raised its FY27-29 volume estimates by 0.5-1 per cent, factoring in recent volume growth momentum, strong CNG vehicle sales, a supportive policy environment and growth opportunities outside Delhi-NCR.

It maintained its 'Buy' rating, citing a robust volume growth outlook, but cut its target price to Rs 170 from Rs 200 due to lower margin expectations.

JM Financial

JM Financial cut its FY28 profit after tax (PAT) estimate by 40 per cent to factor in weak H1 FY27 margins. It also lowered its FY28-29 PAT estimates by 4-5 per cent, factoring in an EBITDA margin of around Rs 6 per standard cubic metre (scm), below management's guidance of Rs 7-8 per scm.

Consequently, the brokerage reduced its discounted cash flow (DCF)-based target price to Rs 155 from Rs 160.

However, JM Financial maintained its 'ADD' rating on the stock, citing valuations. It noted that IGL was trading at a consolidated FY28 estimated P/E of 9.8 times and P/B of 1.5 times. According to the brokerage, the recent correction has factored in key concerns and limits downside risk.