UBS double-downgrades IGL stock to 'Sell' as it sees volume de-growth from FY23–26

Shares of Indraprastha Gas (IGL), a city gas distributor, fell over 2 per cent in early trade on Wednesday (January 10) after foreign brokerage UBS raised its alarm on the stock by double-downgrading it to ‘sell’ from the earlier ‘buy’ call. Besides, the brokerage has slashed the target price on the counter to Rs 400 from the earlier Rs 630.

The brokerage estimates volume de-growth from FY23–26, with growth anticipated at 6 per cent CAGR. The de-growth is foreseen owing to the spur in electric vehicles.

Zee Business Research desk highlights that this is imminent due to the EV order by the Delhi state government. Furthermore, the brokerage pointed out that volume growth continued to be low compared to new CNG stations even in FY21–23. Additionally, there are estimates that margins will remain steady, with no growth anticipated soon.

Nevertheless, the EBITDA forecast has been increased for FY24–26 from the earlier Rs 8.5 to Rs 8.7 per standard cubic metre (SCM).

Over one year, the stock has returned a negative 2.8 per cent.

IGL is a midcap company with a market cap of Rs 30,030 crore. The company's business consists of selling natural gas, and its peers include Adani Total Gas, GAIL, and Gujarat Gas, among others.