The shares of this leading gas distribution company are in focus after it reported a robust fourth quarter and FY25 performance, and several analysts believe in its long-term performance. In this article, we will dive deep into the details of it.
With a market capitalization of Rs 13,763 crores, the shares of Mahanagar Gas Ltd closed at 1,396 per share on Monday, down by 29.8 percent from its 52-week high of Rs 1,988 per share. Over the last five years, the stock has delivered a return of 30 percent.
Motilal Oswal, a leading brokerage house, says that it sees a target price of Rs 1,760 per share, signalling an upside potential of 24.61 percent from its current level. It cited that it is attractively valued after a 30 percent stock price correction and trades at 11x FY27E earnings.
It believes falling crude and gas prices, recent CNG/D-PNG price hikes, and lower input prices are likely to improve margins. Expect 10 percent volume growth and superior margins to make for a compelling investment case for MAHGL relative to fellow city gas stocks.
On the other hand, ICICI Securities has also assigned a buy call with a target price of Rs 1,705 per share, signalling an upside potential of 20.71 percent from its current level.
It cited that it sees a robust volume growth, good margins, 15 percent RoE/ROCE, and attractive valuation (11.4x FY27E P/E), which is low relative to IGL’s and other comparable companies.
While the risk mainly revolves around rising gas costs from the crude oil price volatility, it still sees an upside from decreasing LNG prices and accelerated execution of its projects. Simultaneously, the global giant CITI also reaffirmed their buy rating on the company with a target price of Rs 1,700, signalling an upside potential of 20.36 percent from its current level.
It cited the same reason that it anticipates more than 10 percent volume growth, enabled by the expansion of its CNG site, additional industrial volume, and anticipated M&A plans. The company also has 55 percent oil-linked gas in its portfolio, and expects to maintain strong margins in the future.
Financial Highlights
The company reported a revenue of Rs 7,264 crore in FY25, up by 15.49 percent from its FY24 revenue of Rs 6,290 crore. Coming to its profitability, it reported a net profit decline of 18.5 percent to Rs 1,040 crore in FY25 from Rs 1,276 crore in FY24.
The stock has delivered an ROE and ROCE of 18.94 percent and 24.48 percent respectively, and is currently trading at a P/E of 13.38x as compared to its industry average of 23.14x.
Mahanagar Gas Limited is one of the foremost natural gas distribution companies in India. They provide piped natural gas (PNG) to residential users, commercial users like hotels and hospitals, and industrial users across many sectors ranging from metals, pharma, FMCG, and power.
They also distribute compressed natural gas (CNG) to the transport sector and liquefied natural gas (LNG) to heavy vehicles. Overall, they supply pipes and fittings used in pipeline infrastructure.
Written by Satyajeet Mukherjee
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