On the bourses, Mahanagar Gas share price gained 6.3 per cent to Rs 1,468 apiece on the BSE, in Monday’s intraday trade. By comparison, the benchmark BSE Sensex was up 0.05 per cent at 76,730 levels at 1:30 PM.

Mahanagar Gas Analysts meet: Key takeaways

According to the management, India’s total gas consumption is likely to improve to 500 mmscmd in FY30 from 182 mmscmd in FY24 (98 mmscmd domestic and 84 mmscmd imported).

Besides, the city gas distribution (CGD) sector’s gas consumption is likely to grow to 103 mmscmd in FY30 from 34 mmscmd in FY24.

The government, too, has planned to invest $67 billion in the natural gas sector until FY30.

 

To tap the growing market, Mahanagar Gas had acquired Unison Enviro Private Limited (UEPL) in February, 2024, which currently has 55 CNG stations. UEPL has marketing exclusivity until September, 2028, in two GA’s; infrastructure exclusivity in one GA until August, 2041 and in two GA’s until September 2043.

That apart, it also started a joint venture (MLPL) in December 2023, with 51 per cent holding in the JV.

The company plans to set up 5-6 LNG stations in FY25.

Mahanagar Gas has invested in 3ev Industries Private Limited, which is in the business of manufacturing three wheeler cargo and passenger EVs, with 31 per cent stake worth Rs 100 crore.

Mahanagar Gas FY25 outlook

Mahanagar Gas Management expects a 6-7 per cent volume growth in FY25. UEPL volumes, meanwhile, are expected to grow by more than 10 per cent.

The company said it also plans to invest Rs 1000 crore as capex in FY25. Of this, Rs 800 crore will be spent by MGL and Rs 200 crore by UEPL.

Mahanagar Gas investment strategy: What should investors do?

Motilal Oswal Financial Services | Buy | Target price: Rs 1,565

Mahanagar Gas’ administered price mechanism (APM) allocation is approximately 70 per cent of the priority volumes.

The decline in APM gas allocation is entirely offset by the higher supply of High Pressure, High Temperature (HPHT) gas, which is available on priority. The company also has a 0.5 mmscmd term contract of HPHT.

The management said it has good medium-term visibility for APM/HPHT prices.

“The stock trades at 12.5x FY26E EPS of Rs 110.6. We value it at 14x FY26E EPS to arrive at our target of Rs 1,565. We continue to prefer Mahanagar Gas over Indraprastha Gas owing to its 30 per cent cheaper valuation (on FY26E P/E basis), with broadly similar growth profile in the medium term and relatively lower EV risk,” it said.

Nuvama Institutional Equities | Buy | Target: Rs 1,670

MGLs’ Ebitda margin is expected to normalise owing to price cuts undertaken, coupled with a gradual reduction in APM gas allocation and a recent rise in spot LNG to $12/mmbtu (up 20 per cent Y-o-Y/Q-o-Q), partially offset by the rise in HPHT allocation.

The management expects to maintain a Ebitda margin of Rs 9–11/scm in FY25E versus Rs 14/scm in FY24.

“We reckon MGL shall clock volume growth of 6–7 per cent led by acceleration at UEPL, coupled with steady CNG station additions. Various initiatives imply scope for long-term growth. We believe MGL shall re-rate given it is trading at FY26E PE of 10x, which is two–thirds of IGL’s 16x,” the brokerage said.

Kotak Institutional Equities | Sell | Target: Rs 1,070

“We build in 5 per cent Y-o-Y overall volume growth in the medium-term. We continue to expect a further moderation in MGL’s per-unit Ebitda to Rs 10/scm in FY2025E (from a high base of Rs 14/scm in FY2024 and Rs 11.5/scm in 4QFY24) on the full impact of Rs 2.5/kg CNG price cut in March 2024,” the brokerage highlighted.

First Published: Jun 10 2024 | 2:14 PM IST