Multi Baggers

Indraprastha Gas (IGL) was setup in 1998 to supply CNG and PNG in the city of Delhi. Since then all DTC buses, taxis and auto rickshaws running on the street of Delhi have been converted to CNG and around 40,000 households have been connected with PNG. Going ahead with increased conversions of private vehicles and disallowance of registration of new diesel run LGVs (only CNG run LGVs to be registered) will drive growth for CNG. In the PNG segment the penetration is only at 4% and with real estate growth in Delhi PNG revenues are expected to clock a CAGR of 51.9%.

Operating margins are expected to sustain over the current levels of above 40%. The company is also in initial stages of setting up city gas distribution infrastructure in the NCR region which are expected to contribute to revenue in FY09. These factors will drive CAGR of 17.3% and 21.4% in revenues and PAT respectively. We believe that low business risk and growth prospects of the company will drive valuations for the stock and hence we recommend a BUY on the stock with a target price of Rs 162 providing an upside of 42.2%.