This gas stock has made investors 22% richer in 3 days

Indraprastha Gas shares’ gaining spree continued on Friday, the third day after the firm posted better-than-expected quarterly earnings for the April to June 2022 period.

At the day’s high, IGL shares have gained 21.99 percent since the company announced the financial results, which beat CNBC-TV18 poll estimates on all fronts —profit, revenue, margin, and EBITDA — though its margin dipped on a sequential basis.

The stock jumped 7.25 percent in intraday trade and was trading 5.5 percent higher at Rs 430.45 on BSE at 2:45 pm.

The overall sales volume growth of the natural gas distribution company, which supplies natural gas as cooking and vehicular fuel, was 48 percent over the corresponding quarter in the last financial year.

IGL Managing Director Sanjay Kumar earlier this week said that he hoped to maintain the volume trend of 7.9-8 million cubic metre per day for this whole year.

He, however, said it would be challenging to maintain volumes at 8.5 million cubic meters of gas per day if these prices sustain. "But 8 million cubic metre per day is maintainable,” he told CNBC-TV18 on Wednesday.

Global brokerage firm Jefferies, which has a buy rating on IGL stock but has reduced the target price, believes the gas distribution company has enough room to hike prices though it must defend its margin.

IGL’s Kumar is of the view that increasing prices further would impact volumes and conversion rate, which is at Rs 15,000 per month. He said the firm would like to maintain the conversion rate at current levels.

He added that since CNG and PNG gas prices will go up again from October 1, the cost is one challenge that all city gas distribution (CGD) companies in the country face.

IGL is also planning to add 70-75 CNG stations this financial year, Kumar said.

Post the result, IGL shares also advanced after the government diverted natural gas from industries to city gas operators to check the spiralling CNG and piped cooking gas prices.

The Ministry of Petroleum and Natural Gas amended an earlier order to increase the allocation of domestically produced gas to city gas operators. The allocation for city gas operators such as Indraprastha Gas Ltd of Delhi and Mahanagar Gas Ltd of Mumbai has been increased to 20.78 million standard cubic meters per day, officials said.

The move follows a massive jump in CNG and PNG prices in the country in the last year as operators used costlier imported LNG.

CNG prices in Delhi went up by a massive 74 per cent (from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg now) while PNG prices rose by 70 per cent (from Rs 29.66 per standard cubic meter to Rs 50.59 per scm).

By increasing allocations, the country will be able to meet 94 percent of its demand for gasoline for automobiles and piped gas for cooking. In the past, about 83 percent of the demand was met by GAIL's import of LNG.