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On Wednesday, Indraprastha Gas (NSE:IGAS) Ltd. (IGL:IN) received an improved outlook from Investec (LON:INVP), with the firm’s analyst Abhinil Dahiwale upgrading the stock rating from Hold to Buy. The new price target has been set at INR500.00, adjusted from the previous INR550.00. Dahiwale’s assessment follows IGL’s third-quarter performance, which saw margins dip to their lowest point since 2016, attributed to decreased allocations of APM gas.
Despite the recent challenges, Investec’s outlook for IGL is optimistic. The firm anticipates a recovery in earnings as margins are expected to improve and volume growth is projected to pick up in the financial years 2026-27, particularly when compared to the FY25 base. This optimism comes after the stock experienced a significant decline, with a more than 30% drop in share price over the last three months.
Investec’s analysis suggests that the market’s current view of IGL is overly pessimistic. The current share price is thought to incorporate only a 5% annual EBITDA growth over the next ten years, a figure that Investec considers conservative against their estimate of 9% growth. The firm’s revised target price is based on a discounted cash flow (DCF) methodology.
The upgrade to a Buy rating reflects Investec’s belief that the worst may be over for IGL and that there is a favorable risk-reward balance at the current valuation. Dahiwale’s commentary emphasizes the potential for IGL’s earnings to bounce back, banking on the expected recovery in margins and volume growth in the coming years. This perspective offers a more hopeful outlook for the gas company’s financial performance moving forward.
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