Buy Mahanagar Gas; target of Rs 1680: Emkay Global Financial

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Emkay Global Financial's research report on Mahanagar Gas

Mahanagar Gas (MGL) hosted its analyst meet on 7-Jun-24, highlighting its strong FY24 performance, and guided to a steady 5-year volume CAGR of 6- 7%/>10% in standalone (SA)/Unison Enviro (UEPL) vs. ~5% during FY19-24. Management indicated a clear focus on infrastructure creation to spur demand growth, with capex target for FY25 at Rs10bn—split between SA and UEPL at Rs8bn and Rs2bn, respectively. APM gas allocation is ~70% of priority vol. now and the shortfall is being met via HP-HT gas. Company targets opening 5-6 LNG stations p.a. with Baidyanath LNG. It could see some margin downtick to spur volume growth, but margin superiority vs. peers could sustain on operating efficiencies, high population density, etc.

Outlook

We retain BUY on MGL and our Mar25E TP of Rs1,680/sh, implying an attractive consol. target P/E of 13.2x.

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Mahanagar Gas - 10062024 - emkay