Mahanagar Gas - Robust Volume Growth Outlook: HDFC Securities

HDFC Securities Institutional Equities

Mahanagar Gas Ltd. stock rallied ~26% over the last six months and outperformed Sensex by ~19%. We expect this outperformance to sustain, driven by-

1. a pickup in volume growth and

2. robust margins.

The recent Vahan data continues to support our investment thesis with FY24 year-to-date data suggesting a strong trend in new CNG vehicle registrations in Mahanagar Gas’ geographical areas which should outpace new CNG vehicle registrations seen in FY23.

The company cut CNG price in Oct-23 by Rs 3/kg which should help pick up CNG vehicle registrations too. Mahanagar Gas’ acquisition of Unison Enviro Pvt. Ltd. three GAs should also add to its overall volume growth.

At the current price, Mahanagar Gas’ valuation is at 11.3 times Mar-25E earnings per share, a ~10% discount to its five-year average multiple of 12.5 times despite a better volume growth outlook.

Mahanagar Gas’ valuation still remains attractive as current market price factors only 4.3% volume growth.

We, therefore, reiterate our 'Buy' recommendation on Mahanagar Gas with a target price of Rs 1,535/share.

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