KR Choksey is bullish on Mahanagar Gas has recommended buy rating on the stock with a target price of Rs 1400 in its research report dated November 10, 2017.
KR Choksey's research report on Mahanagar Gas
Mahanagar Gas Ltd. (MGL) reported revenues of INR 5,880 mln up 2.9% YoY and 0.9% QoQ. This was primarily driven by 14.3% yoy increase in revenues from PNG segment. The net profit of INR 1,248 mln up by 22.1% YoY but remained flat at 0.4% QoQ. The sales volumes for CNG came in at 183.52 mln SCM, an increase of 7.02% QoQ while the PNG sales volumes came in at 65.18 mln SCM up 5.02% QoQ. EBITDA margins were 22.6% as compared to 22.9% in Q2FY17. The company has targeted to set up 20 gas stations in the country out of which 4 are completed while 9 are in the offing. This expansion will further boost the companies’ volume growth. We believe that with more thrust towards greener fuel, MGL will benefit from it. To fuel further growth MGL needs to add more CNG stations and connect more housing clusters with direct gas lines.Outlook
At a CMP of INR 1159, the stock is trading at 29.7x of its FY19E earnings and at 29.3x of its FY20E earnings. We recommend a BUY rating with a target price of INR 1400 (upside – 20.79%).
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