Indraprastha Gas stock price target raised to INR240 by CLSA

CLSA has raised its price target on Indraprastha Gas Ltd. (IGL) to INR240.00 from INR210.00, maintaining an Outperform rating, despite the company's Q2 FY26 standalone profit falling 16% below estimates due to weaker unit EBITDA margins and slower volume growth. This upward revision reflects CLSA's continued confidence in IGL's growth trajectory, driven by a new joint venture to expand city gas distribution into Saudi Arabia and management's guidance for substantial improvements in volumes and margins over the next two quarters, projecting 8-10% medium-term volume growth.

Analysis

CLSA has increased its price target for Indraprastha Gas Ltd. (IGL) to INR240.00 from INR210.00, while maintaining an Outperform rating. This upward revision occurred despite IGL reporting a Q2 FY26 standalone profit after tax that was 16% below CLSA’s estimates, primarily due to weaker unit EBITDA margins and slower-than-anticipated volume growth.

The positive re-rating is largely driven by IGL's recently announced joint venture for city gas distribution expansion into Saudi Arabia, which CLSA views as offering significant long-term volume potential. This strategic move is expected to diversify and bolster the company's growth trajectory beyond its domestic operations.

Furthermore, CLSA acknowledges management's guidance for substantial improvements in both volumes and margins over the next two quarters, projecting medium-term volume growth of 8-10% and unit EBITDA of INR7-8 per standard cubic meter. While CLSA's own estimates remain below these company-provided figures, the firm's increased target price reflects underlying confidence in IGL's future prospects and strategic initiatives.

Key Decisions for Investors

• Investors should closely monitor the execution and initial results of IGL's Saudi Arabian joint venture, as this expansion is a key driver for long-term volume growth.
• Consider the potential upside from management's optimistic guidance on volumes and margins, but also note CLSA's more conservative estimates, which could indicate differing risk assessments.
• Evaluate IGL's ability to improve unit EBITDA margins and accelerate volume growth in the near term to align with management's projections and justify the increased price target.