Mahanagar Gas Gets PL Capital's 'Add' Upgrade, Hikes Target Price Post Q1 Results — Here's Why
PL Capital raises its valuation multiple from 11x to 12x FY27 with a revised target price and upgrage Mahanagar Gas from ‘Hold’ to ‘Accumulate’ considering the strong volume growth expected.
(Photo: Mahanagar Gas/Facebook)
Mahanagar Gas' realization stood at Rs 48.4/scm vs Rs 47.7/scm in the previous quarter. Gas cost remained broadly flat QoQ, resulting in gross margin expansion from Rs 15.6/scm to Rs 16.3/scm during the quarter. Opex stood at Rs 5.7/scm during the quarter vs Rs 6.4/scm during the previous quarter.
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PL Capital Report
As a result of relaxation in pricing terms for industrials combined with incentives for goods carriers taken a few quarters back, Mahanagar Gas Ltd. continued its stellar volume growth at 9.6% in Q1 FY26. Adjusted Ebitda/scm stood at Rs 9.7.
As a result, adjusted Ebitda stood at Rs 3.7 billion (our estimate/Bloomberg estimate Rs 4 billion, -11% YoY and +18% QoQ). Adjusted PAT stood at Rs 2.4 billion (our estimate: Rs 2.8 billion, BBGe Rs 2.6 billion, -9% YoY and +6.8% QoQ).
We believe that the volume momentum is likely to sustain, especially due to strong pick up in GA3, momentum in CNG adoption by goods carriers and increased industrial volume sales.
We build in overall volume growth of 10% in each of FY26 and FY27 with adj Ebitda/scm of Rs 9.8/10 in FY26 and FY27 respectively.
We raise our valuation multiple from 11x to 12x FY27 with target price revised from Rs 1,425 to Rs 1,559 and upgrade the stock from ‘Hold’ to ‘Accumulate’ considering the strong volume growth expected.
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