'Buy' Mahanagar Gas Says HDFC Securities On Strong CNG Vehicle Registrations; Revises Target Price

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HDFC Securities Institutional Equities

The Mahanagar Gas Ltd. stock price rose ~3% and outperformed the Sensex by ~4% in the last one month. This positive price movement could be attributed to the CNG price hike undertaken by the company in December 2024. Going ahead, we expect-

1. Mahanagar Gas to replace expensive spot gas purchases with cheaper high pressure-high temperature domestic gas,

2. continued strong CNG vehicle registration; accelerated addition of retail outlets; customer additions in the industrial segment; and

3. volume growth contribution from the acquired three GAs of Unison Enviro Pvt. Ltd.

Competitive CNG price versus auto-fuels should support robust volume growth for Mahanagar Gas at 12% CAGR over FY24-27E and Ebitda margin improvement in FY26E from the lows of H2 FY25E.

We maintain our Buy rating on Mahanagar Gas with a revised target price of Rs 2,000/share.

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