UBS has upgraded its rating on Indraprastha Gas Limited (IGL) from “Sell” to “Buy,” reflecting a significant shift in its outlook for the company. The brokerage has also raised its target price for IGL to Rs 700, a notable increase of 75% from the previous target of Rs 400.
The revised recommendation comes as UBS forecasts an improvement in IGL’s volume growth trajectory. After experiencing a subdued growth rate of around 4% YoY in FY24, UBS now expects the company’s volume growth to accelerate to an 8.2% CAGR from FY24 to FY27. This optimism is driven by the company’s planned infrastructure expansion and entry into new geographies.
UBS had previously maintained a bearish stance on IGL due to concerns about tapered volume growth and potential risks associated with electrification. However, the brokerage now believes that these risks are manageable and that IGL’s strong near-term fundamentals, combined with potential inorganic growth opportunities, offer a compelling investment case.
The upgrade also reflects UBS’s revised outlook on IGL’s market position and growth potential, which includes potential mergers and acquisitions that are not yet priced into the current valuation.
