Indraprastha Gas zooms up to 6% as UBS upgrades stock to 'buy'; MGL hits new 52-week high

CGD stock prices: Gas distribution stocks are in focus in Tuesday's session (September 17) as global brokerage UBS on the outlook of these companies said that inorganic growth prospects complement strong near-term fundamentals.

The brokerage believes infrastructure expansion and new geographies are set to drive volumes for companies in the space.

Likewise, UBS upgraded Indraprastha Gas (IGL) to 'buy' from the earlier 'sell' call with a target price raised to Rs 700 from Rs 300. The new raised target implies a potential upside of 32 per cent from the previous close. The brokerage in an earlier instance maintained a bearish view on the city gas distribution (CGD) major on the back of tapered volume growth in previous quarters. & possible electrification risk.

At the last count, shares of IGL traded higher by over 4 per cent at Rs 551.9 apiece on the BSE, while at day's high it scaled Rs 559.65, nearing its 52-week high price scaled on September 2.

Nonetheless, the potential mergers and acquisitions (M&A) opportunities have not been priced in by the global brokerage.

For IGL, UBS now expects volume growth trajectory to improve, from about 4 per cent YoY in FY24 to an 8.2 per cent CAGR in FY24- 27E. 

Similarly, for Mumbai-based Mahanagar Gas, the brokerage has continued with its call as it expects strong volume growth to sustain. Also, the brokerage given the tailwinds has raised target to Rs 2,400 from the earlier Rs 1,600. The target means an upside of 32 per cent from the last close. 

The brokerage maintained that volume trajectory (organic/inorganic) could continue to surprise positively on the back of CGN fleet and infra development.

UBS raised FY25-27E volume estimates to 7-11 per cent, while FY25-27E EBITDA/scm estimates are raised to 6-11 per cent.