Mahanagar Gas - Steady Volume Growth, But Lower Margins Likely: Prabhudas Lilladher

Prabhudas Lilladher Report

Future growth for Mahanagar Gas Ltd. is poised to be driven by geographical area-3, where penetration remains significantly lower compared to the more established GA1 and GA2.

Robust performance in the industrial segment would further support its growth trajectory. However, margins could taper off given the falling domestic gas allocation, while the possibility of fuel price cuts could impact its competitive positioning.

Thus, we build in a volume of 6% compound annual growth rate over FY24-27E to 4.3mmscmd. Ebitda/standard cubic metre is estimated at Rs 10.5 for FY25E, and Rs 10/10 for FY26/27E.

Upgrade rating from ‘Sell’ to ‘Hold’ with a target price of Rs 1,864 based on 18 times average FY26/27EPS.

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