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Multi Baggers

Ventura Securities

5.30 AM Jan 1st 1970

IGL

BSE ID : 532514     NSE ID : IGL

RECOMMENDED PRICE 530.15

PEAK FROM RECO 604.00 13.93%

CURRENT PRICE 401.55 Resource id #17

We initiate coverage on IGL with a BUY with a target price of Rs 691 representing a potential upside of 31% over next 18 months.

Incorporated in 1998, Indraprastha Gas​ Limited took over the Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited. IGL continues to augment its infrastructure so as to meet the increasing demand of CNG arising out of growing number of CNG vehicles in Delhi.

We believe that IGL represents a compelling story to play the City Gas Distribution (CGD) business. The recent SC directive led traction around reducing pollution in the NCR region should provide a fillip to CNG gas volumes. Also with only 16% out of 40+ lakh households receiving piped gas, there exists significant scope for continuous growth of PNG volumes. Further, investments in other CGD geographies and bids for new geographies should improve visibility around sustainable growth over the medium to long term.

At the CMP of Rs 528, IGL is available at 10.6X FY18 earnings. We initiate coverage on IGL with a BUY with a target price of Rs 691 (14X FY18 EPS of Rs 49.4) representing a potential upside of 31% over next 18 months. 

Our optimism stems from the following:
 
Over the period FY12-FY15, CNG volumes have been growing at a lacklustre 4% CAGR. But with the SC verdict, a sweeping change in the fuel consumption pattern is expected with a substantial ramp up in CNG sales volumes. We expect CNG sales to grow at a 13% CAGR to Rs 4,339.8 crore in FY18 from Rs 3,002.42 crore reported in FY15 given that 

- No new diesel passenger vehicles will not be registered in Delhi

- Registration of diesel vehicles more than 10 years old will not be renewed

- Entry tax (on diesel CVs) has been raised

- There could be a complete ban on entry of diesel vehicles once the necessary infrastructure has been created.

- Delhi and Pune pollution levels are at alarming level and thus may
push NGT to adopt CNG aggressively.

- Conversion of CV into CNG growing at a brisk pace

- Renewed thrust on improved public transport to lead to higher
demand for CNG buses

- CNG stations to get a fillip with the SC decision

We expect PNG demand to grow at a CAGR of 7.9% to 41.5 crore SCM by FY18. Consequently, revenues are expected to grow at a CAGR of 11.5% to Rs 1,453 crore by FY18. The triggers for volume growth are as under 

- Significant latent demand waiting to be tapped
- Falling prices should boost CNG usage by industrial and commercial consumers
- NCR household growth signifies strong demand potential

For full details, Click on the attachment.

Disclosures and Disclaimer: Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is member of BSE, NSE and MCX-SX. VSL is a depository participant of NSDL. VSL states that no disciplinary action whatsoever has been taken by SEBI against it in last five years except administrative warning issued in connection with technical and venial lapses observed while inspection of books of accounts and records. Ventura Commodities Limited, Ventura Guaranty Limited, Ventura Insurance Brokers Limited and Ventura Allied Services Private Limited are associates of VSL. Research Analyst (RA) involved in the preparation of this research report and VSL disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any compensation for investment banking merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any compensation for product or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the subject company or third party in connection with the research report. RA involved in the preparation of this research report discloses that he / she has not served as an officer, director or employee of the subject company. RA involved in the preparation of this research report and VSL discloses that they have not been engaged in the market making activity for the subject company. Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of VSL. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients / prospective clients of VSL. VSL will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of clients / prospective clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. And such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by VSL, its associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. We do not provide tax advice to our clients, and all investors are strongly advised to consult regarding any potential investment. VSL, the RA involved in the preparation of this research report and its associates accept no liabilities for any loss or damage of any kind arising out of the use of this report. This report/document has been prepared by VSL, based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. VSL has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change. 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The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of VSL and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection. This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. 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