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ICICI Securities Report
A Petroleum and Natural Gas Regulatory Board member and the Oil Ministry, recently flagged execution delays and profit margins of city gas distribution companies.
We believe the comments, in conjunction with the price cuts taken in the CNG segment – Rs 2.5/kg by Mahanagar Gas Ltd. and Indraprastha Gas Ltd., effective March 06, 2024 and March 07, 2024, respectively, have combined to steeply impact CGD stocks negatively.
That said, we do find comfort in PNGRB clarifying that they do not intend to regulate margins for CGDs, coupled with the fact that gross margins for both IGL/Mahanagar Gas remain above historical levels and FY25 estimates despite the price cut.
With valuations at comfortable levels and no material threat to margins, we maintain Buy on Mahanagar Gas, Add on IGL and Sell on Gujarat Gas Ltd. at these levels
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