The firm upgraded Indraprastha Gas to buy and raised the target price to ₹700.
In the case of Mahanagar Gas, UBS retained its buy rating while raising its target price to ₹2,400 from ₹1,600.
UBS said that the city gas space is at a critical point where smaller entities are turning sellers and strategic partners due to issues such as non-performance from new/small entities, infrastructure-commitment defaults, gas-sourcing challenges and capital constraints. that consolidation of smaller players in the city gas space.
This is expected to lead to consolidation of smaller players and offers both companies an opportunity to access new areas as all geographies are already licensed out.
While Mahanagar Gas has already shown its intent for inorganic growth, Indraprastha Gas has stated that it is considering inorganic opportunities which could aid its volume expansion, said analysts.The bearish stance on Indraprastha Gas was due to tapered volume growth in previous quarters and possible electrification risk. While the pace of electrification risk has lagged, the volume growth increased 5.5% in the first half of 2024 and the company has rapidly added CNG station additions in response to the increasing CNG vehicle fleet.UBS said that the updated view reflects a potential rebound in volume growth, slower than-expected electrification pace and inorganic opportunities for IGL.