Add Indraprastha Gas Ltd for the Target Rs. 180 by Emkay Global Financial Services Ltd
IGL’s Q4FY26 SA EBITDA/APAT of Rs4.2/2.8bn missed our estimates by 15%/20%, largely owing to higher RM gas costs and opex. Volumes grew 6% YoY to 9.7mmscmd (up 3% QoQ; in-line), with CNG volume rising 5% YoY (inline); impacted by lower offtake from DTC buses. Ex-DTC, CNG volume growth stood at ~10%. IGL is witnessing 16-17% volume growth from new GAs, with the management guiding for ~1mmscmd volume addition by Q4FY27, driven by 10-13% growth in CNG and ~20% in DPNG, with billed DPNG customer additions expected at 0.3-0.4mn vs 0.2-0.25mn earlier YoY. While IGL is expected to see margin weakness in Q1FY27, long-term EBITDA/scm guidance remains intact at Rs7-8. FY26 capex was Rs11.7bn, while the FY27 target is Rs14-15bn. We cut FY27E EPS by 12%, building lower EBITDA margins amid a volatile outlook. We slightly raise FY28E EPS by 3% on better volumes. We roll forward to Mar-28E, cutting our TP by ~5% to Rs180 from Rs190; retain ADD.
Result Highlights
SA EBITDA/APAT in Q4FY26 was up 11%/5% YoY and down 16%/27% QoQ. PNG volume grew 6% YoY (2% beat), driven by 13% YoY growth in DPNG (in-line), while I/C PNG growth was 4%. Gross margin fell 2% QoQ to Rs10.9/scm (5% miss), as unit gas cost rose 3% QoQ to Rs36.8/scm (3% above estimate), partly offset by 2% QoQ uptick in net book realization to Rs47.7/scm. Unit opex fell 2% YoY to Rs6.1/scm, although it was up 14% QoQ and 5% higher than estimated; other expense was 4% higher at Rs4.7bn, while employee cost was up 19% YoY. EBITDA/scm declined 16% QoQ to Rs4.8 (up 5% YoY; a 15% miss). Other income was up 8% YoY to Rs1.0bn (down 22% QoQ; in-line), while ETR was higher at 28%. Finance cost at Rs74mn was significantly higher than the estimated Rs24mn. Profit share from CUGL-MNGL was down 39% YoY/15% QoQ to Rs660mn. IGL’s FY26 SA revenue/EBITDA/APAT was Rs161.7/18.8/13.9bn, up 9%/up 2%/flat YoY, with EBITDA/scm down 3% YoY to Rs5.5; total volume grew 4% YoY to 9.4mmscmd. The Board recommended a final dividend of Rs1.5/sh (49% annual payout).
Management KTAs
Q4 volume growth was 0-1%/6-8%/16-17% in Delhi/NCR/new GAs. DTC volume is now negligible (<1,000kg/day), with only 25 operational CNG buses; the number of DIMTS buses are 1,790. The higher spot LNG cost was fully passed on to I/CPNG customers, with some markup. 1mn DPNG customers remain connected albeit unbilled; of these, ~0.5mn are easily convertible. Gurugram offers high expansion potential, with 47% of new vehicle sales being CNG, and peers supplying ~0.8mn kg/d vs ~0.2mn kg/d by IGL in its GA. Haryana’s new EV policy has allowed CNG vehicles for 4W cab aggregators and delivery fleets. Unit gas costs are up 25% from pre-conflict; pricing is being monitored.
Valuation
We value IGL on DCF-SoTP basis. Mar-27E TP of Rs180 implies ~11.0x Mar-28E consol target P/E. Key risks: Lower gas allocation, adverse pricing, margin, currency scenarios; open access; rate of EV adoption; project delays.
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