IGL, MGL shares jump 3% after Axis Capital sees 4 positive triggers for city gas companies

The shares of city gas distributors Indraprastha Gas (IGL) and Mahanagar Gas (MGL) surged over 3 percent on March 20 after Axis Capital issued bullish calls for the two stocks and suggested target prices with strong upsides.

Axis Capital in its latest note said that City Gas Distribution (CGD) sector should benefit from its aggressive expansion. Additionally, CNG business is set to be more favorable when compared to petrol or diesel vehicles. The brokerage said that the new CNG vehicle models are expanding the addressable market to approximately 55 percent of the total PV industry volume. This comes on the back of supportive government policies.

Axis Capital further said that it prefers companies with higher exposure to CNG as they are set to see the fastest growth in the value chain. The brokerage predicted that the key players in the market are set to focus on profit expansion through value engineering, instead of price hikes.

Axis Capital upgraded the rating of the shares of IGL to 'Buy' from its earlier 'Add', and kept a target price of Rs 224 per share. This implies an upside potential of nearly 16 percent from the stock's previous closing price of Rs 193 per share. IGL shares jumped over 3 percent to trade at nearly Rs 200 apiece on March 20.