On IGL, MGL and GAIL shares, UBS is quite bullish; Anil Singhvi decodes

Zee Business Managing Editor Anil Singhvi revealed that there is a double upgrade on IGL, the stock has been upgraded to Buy from Sell rating. The price target has been increased to Rs 650 from Rs 410. MGL has been upgraded to Buy from Neutral Rating, price target has been increased to Rs 1300 from Rs 1100. UBS have maintained hold rating on GAIL while the target price on GAIL has been increased to Rs 160 from Rs 140.

The report highlights that there is shift in fuel demand from the Auto Sector. The shift has been towards the Gas usage vs traditional use of Petrol and Diesel. This shift will benefit city gas distribution companies as demand for Gas will increase going forward.

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Demand will be more due to many reasons explained below:

1. Gas is much cheaper when compared to other fuels
2. According to the new regulations, if oil marketing companies are setting up a fuel station, in 3 years they have to set up an alternative fuel station in that new space. It could be either electronic vehicle station or CNG station.

IGL, MGL और GAIL पर क्यों बुलिश हुआ UBS?

जानिए क्या हैं नए लक्ष्य...#IGL #MGL @AnilSinghvi_ @VarunDubey85 pic.twitter.com/J3Q6SaO8Ob

— Zee Business (@ZeeBusiness) January 12, 2021

Electronic Vehicle structure is not much in demand as of now. Also, overall structure of Electronic Vehicle is not ready. This implies that oil marketing companies will have to set up CNG fuel stations. Also, there is continuous surge in the demand of CNG and will increase going forward as well which will benefit companies like IGL and MGL.

Furthermore, when compared to other fuels, CNG is much cheaper which will help them to improve their margins of IGL and MGL. This in turn will benefit Gas companies like GAIL as well.