Major CNG, PNG supplier to turn ex-dividend on 15 Sept, to pay 275% dividend. Should you purchase?

CNG and PNG supplier, Indraprastha Gas (IGL) shares climbed greater than 1% on Tuesday forward of its 275% dividend document date. IGL shares will turn ex-dividend tomorrow forward of their document date to decide eligible shareholders for the dividend profit for fiscal 12 months FY22. IGL is a large-cap inventory, which is engaged within the enterprise of supplying pure gasoline to prospects within the home and business sectors. Experts are optimistic in regards to the firm going ahead due to its sturdy quantity progress and pricing energy within the core CNG section.

IGL shares closed at 429.90 apiece up by 0.93%. The shares jumped by a minimum of 1.2% on BSE through the day with an intraday excessive of 431 apiece.

The firm’s market valuation is round 30,093.03 crore.

IGL shares have superior almost 4% up to now on this week’s buying and selling session. In the final three months, the shares have given double-digit progress with good points of over 26%.

Indraprastha Gas dividend

Indraprastha Gas has declared a dividend of 5.5 per share having a face worth of 2 every (275%) for monetary 12 months FY22.

Last month, Indraprastha Gas introduced that “share transfer books of the company shall remain closed from September 17, 2022, to September 27, 2022 (both days inclusive) for the purpose of Annual General Meeting and ascertaining the eligibility for payment of dividend.”

Thereby, the shares of Indraprastha Gas will turn ex-dividend on September 15.

The firm is about to maintain its twenty third annual normal assembly on September 27, the place it should search shareholders’ approval for the dividend amongst different key developments.

Should you purchase Indraprastha Gas shares?

Avishek Datta, Research Analyst at Prabhudas Lilladher in put up Q1 report mentioned, “We increase our FY23/24E earnings higher by ~3% as we lower depreciation charges while we maintain our volumes and margins in a rising gas cost environment.”

Datta’s notice added, “In the near term, the rising price of domestic gas supplied to City Gas Distribution (CGD) due to blending of high priced spot LNG volumes will be a concern (even though company passed it on to customers).”

However, the analyst’s notice added, “RILKGD6’s higher blending with additional deep water supplies of 12mmscmd (to gradually ramp up) from Oct-22 will ease pricing pressure. CGD industry has made representation to the government of rising gas prices and company remains hopeful of near term solution.”

On the valuation, Datta’s notice mentioned, “IGL remains an enviable business model with high volume growth due to geographical expansion and addition of new buses and taxis. Reiterate “BUY” with DCF-based PT of Rs576 (Rs589) as we decrease the depreciation quantity in step with Q1 developments.”

In Q1FY23, Indraprastha Gas posted a consolidated net profit of 481.24 crore compared to 277.95 crore in the same quarter last year. Consolidated revenue from operations rose by over 2.5 folds to 3,530.34 crore against 1,380.49 crore in Q1FY22.

During the first quarter of FY23, the company’s volumes improved at 8.0mscm (+4% QoQ; PLe 6.9) as economic activity picked up. For Q1FY23, CNG and PNG volumes were at 5.9mscmd (+6% QoQ) and 2.1mmscmd (flat QoQ), respectively.

Talking about the overall city gas sector in the latest report dated September 12, HDFC Securities stated that “City Gas Distribution (CGD) corporations, Indraprastha Gas (IGL), Gujarat Gas (GGL), and Mahanagar Gas (MGL) have corrected by 26-29% during the last 12 months, underperforming the BSE Sensex by 28-31%, as traders anticipated sustained margin strain with rising enter gasoline prices.”

According to the HDFC Securities report, the correction is believed to be overdone especially as the CGDs have passed on the input gas cost increase underscoring their pricing power, the government has tweaked the domestic gas supply to favour the CGDs and CNG/DPNG (domestic piped natural gas) volume has seen the minimal adverse impact of the retail price increases.

Indraprastha Gas is HDFC Securities’ preferred pick within the CGD space due to its strong volume growth and pricing power in its core CNG segment. The stock broker has given a buy rating with a target price of 520 on the company.

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