Buy Mahanagar Gas; target of Rs 1200: Motilal Oswal

HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Mahanagar Gas

Mahanagar Gas (MAHGL) reported mixed 2QFY22 results, with volumes 11% higher than our estimate at 3.1mmscmd, while EBITDA/scm was lower at INR10.5 (v/s our estimate of INR12.5 and INR13.9 in 1QFY22). Thus, EBITDA came in line (at INR3b) with our estimate. The volume recovery was strong as economic activities returned to normal, with total volumes growing further by 7-8% in Oct’21 (~3.34mmscmd). The EBITDA margin decline in 2QFY22 was due to a sharp spike in spot LNG prices. The demand for CNG went up drastically post the easing of the second COVID lockdown, due to which MAHGL had to use spot LNG for ~5% of priority gas volumes. This percentage increased further as volumes ramped up. MAHGL has requested the Ministry for using average gas volumes for 2Q to allocate priority gas volumes for 2HFY22.

Outlook

The stock trades at 12x FY23E EPS of INR83, and upon valuing it at 14x Dec’23E EPS, we arrive at a target price of INR1,200. Maintain Buy.

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