Indraprastha, Mahanagar Gas Share Prices Extend Loss After More Target Price Cuts

Shares of city gas distributors Indraprastha Gas Ltd., Mahanagar Gas Ltd., and Gujarat Gas Ltd. continued their declines on Tuesday, as more brokerages downgraded the stocks' ratings and cut target prices.

The downgrades come as Indraprastha Gas and Mahanagar announced that their domestic gas allocation from GAIL (India) Ltd. has been reduced in the range of 13-20%.

After Jefferies downgraded both of these stocks to 'underperform' on Monday, Indraprastha Gas' shares had closed over 19% lower, while Mahanagar Gas stock lost more than 13% in a single session.

Tuesday's fall comes as investors assessed negative commentary from more brokerages. Nomura Research has downgraded Indraprastha Gas Ltd. to 'reduce' and reiterated its 'reduce' on Mahanagar Gas Ltd., lowering the target prices and maintaining a bearish stance on the sector.

Citi has also cut target prices for Indraprastha Gas and Mahanagar Gas to Rs 450 per share and Rs 1,650 apiece, respectively, but has maintained its 'buy' rating on these stocks. It has a 'sell' rating on Gujarat Gas with a lower target price of Rs 440 per share from Rs 490 apiece earlier.

At current levels, the downside in IGL's and Mahanagar's stocks may therefore be limited, Citi said. "However, the absence of positive catalysts and uncertainty on further policy surprises may limit near-term upsides and lead to time correction."

The current levels could, nonetheless, start offering an attractive opportunity to investors with a longer-term horizon, Citi said.

On Tuesday, Indraprastha Gas' share price fell as much as 2.6% to hit Rs 316.74 per share, its lowest level since March 25, 2020, before erasing losses to trade flat at 10:22 a.m.

Of the 36 analysts tracking the company, 15 maintain a 'buy' rating, eight recommend a 'hold' and 13 suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 36.6%.

Mahanagar Gas' stock fell for a seventh consecutive session losing more than 22% in the fall. At 10:21 a.m. it was trading flat.

Fourteen analysts have a 'buy' on the stock, seven recommend 'hold' and 12 suggest 'sell'. The average 12-month analysts' consensus price target implies an upside of 39.2%.

Meanwhile, Gujarat Gas erased its early losses and recovered after falling consecutively in six sessions. Of the 32 analysts tracking the company, 10 maintain a 'buy' rating, six recommend a 'hold' and 16 suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 20%.