Buy Mahanagar Gas; target of Rs 2200: Motilal Oswal

Motilal Oswal is bullish on Mahanagar Gas has recommended buy rating on the stock with a target price of Rs 2200 in its research report dated July 28, 2024.

Broker Research

July 30, 2024 / 22:19 IST

BUY

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on Mahanagar Gas

Mahanagar Gas Ltd.’s (MAHGL) EBITDA decreased 20% YoY to INR4.2b in 1QFY25, mainly driven by a 29% YoY dip in EBITDA/scm to INR11.9 (MOSL est: INR 10.9). Volumes grew 13% YoY to 3.9mmscmd driven by CNG and I/C-PNG. Key highlights from the conference call: 1) EBITDA/scm came in strong despite APM gas allocation below 70% in 1QFY25, 2) management guidance on both margin and volume growth remains conservative at 7% volume growth (ex-UEPL) and INR10-12 EBITDA/scm, 3) volume growth at UEPL is in mid-teens and can sustain for the next 6-7 years, 4) MAHGL is looking to add 75 stations in FY25 on a base of ~400 stations (incl. UEPL), 5) MAHGL guided an improved volume outlook in 2Q/3QFY25, besides margin support from CNG price hikes taken in early Jul’24.

Outlook

We expect a 7% CAGR in volume over FY24-26, driven by multiple initiatives implemented by the company, such as partnering with OEMs to drive conversions of commercial CNG vehicles and providing guaranteed price discounts to new I/C-PNG customers.The stock trades at 13.5x FY26E EPS of INR136.9. We value it at 16x FY26E EPS to arrive at our TP of INR2,200. Reiterate BUY.

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