Mahanagar Gas - Remain Positive Amid Government Distractions: Motilal Oswal

Motilal Oswal Report

Mahanagar Gas Ltd.’s stock price declined over 15% on March 06, 2024 after Mr. Hardeep Singh Puri, Minister of Petroleum and Natural Gas, said that the full benefits of gas sector reforms have not reached the end user and that city gas distributions are posting strong profits. He also declared the government’s commitment to ensuring the benefits of gas reforms reach end-consumers directly.

The market likely believes that the recent compressed natural gas price cut by the company is driven by the minister’s statements about CGDs making high Ebitda/standard cubic metre margins.

We believe that the current stock price correction is partly an overreaction and partly driven by profit-booking following the strong run-up in the last six months.

We believe that the current weakness is a good opportunity to buy a franchise with decent volume growth visibility at reasonable valuations. We remain positive on Mahanagar Gas and retain our 'Buy' rating.

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