Sell Mahanagar Gas; target of Rs 1266: Geojit Financial Services

Geojit Financial Services research report on Mahanagar Gas

Mahanagar Gas Ltd (MGL) distributes natural gas to households, commercial establishments and industries in India. In Q1FY26, the company’s consolidated revenue rose 24.6% YoY to Rs. 2,282cr due to growth in sales volume and the customer base. Gas volume increased 9.6% YoY to 4.229 MMSCMD, comprising 2.981 MMSCMD compressed natural gas (CNG), 0.569 MMSCMD domestic CNG and 0.679 MMSCMD industrial and commercial segment supply. The company has a strong customer base, with over 1.13mn CNG vehicles (vs 1.11mn+ in Q4FY25) and 2.85mn households (vs. 2.83mn+) with piped natural gas. UEPL, an MGL subsidiary, reported a strong Q1FY26 performance, with the addition of four new CNG stations, 3,338 new domestic households, and one new industrial customer. It also laid 73.8 km of pipeline, suggesting strong growth momentum with potential for further expansion in the coming quarters. EBITDA increased 14.6% YoY to Rs. 501cr, driven by strong revenue growth. However, the EBITDA margin contracted by 190bps to 21.9%, primarily due to a 30.5% increase in the cost of materials and a 22.0% rise in other expenses.

Outlook

Hence, we downgrade our rating from ACCUMULATE to SELL on the stock, with a revised target price of Rs. 1,266, based on 11x FY27E adj. EPS.