Buy Mahanagar Gas, target price Rs 1,705: ICICI Securities

ICICI Securities maintains buy call on Mahanagar Gas with a target price of Rs 1705. The current market price of Mahanagar Gas is Rs 1327.55. Mahanagar Gas, incorporated in 1995, is a Mid Cap company with a market cap of Rs 13537.99 crore, operating in Gas & Petroleum sector.

Mahanagar Gas' key products/revenue segments include Gas Natural, Other Operating Revenue and Pipes & Fittings for the year ending 31-Mar-2024.



Financials
For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 2006.40 crore, up 6.19% from last quarter Total Income of Rs 1889.40 crore and up 21.11% from last year same quarter's total Income of Rs 1656.74 crore. The company has reported net profit after tax of Rs 247.87 crore in the latest quarter.

The company's top management includes Mr.Sandeep Kumar Gupta, Mr.Ashu Shinghal, Mr.Sanjay Shende, Mr.Rajeev Bhaskar Sahi, Ms.Malvika Sinha, Mr.Syed S Hussain, Mr.Venkatraman Srinivasan, Dr.Harshadeep Kamble. Company has Deloitte Haskins & Sells LLP as its auditors. As on 31-03-2025, the company has a total of 10 crore shares outstanding.

Investment Rationale
ICICI Securities remains optimistic on MGL?s prospects over the next five years, with clear long-term visibility on volumes, still peer-leading margins, RoE/RoCE of >15%, dividend yield of 3% and very attractive valuation of ~11.4x FY27E PER and EV/EBITDA of 6.0x. The target price of Rs 1,705 (unchanged) implies a material 28% upside from CMP. The brokerage notes current multiple of 11.4x on FY27E is still well below ~17.6x FY27E PER for IGL, which they believe should narrow, given the parity in earnings performance that they estimate for FY26?28E. Even at the target price, PER for FY27E rises to ~14.6x, at a substantial discount to peers, which leaves sufficient buffer for negative surprises.

Downside risks: 1) Higher-than-expected spike in gas cost. 2) Inability to pass on gas cost increases. 3) Sharper fall in alternate fuel prices for CNG (petrol/diesel).

Upside risks: 1) Softer LNG prices. 2) Faster execution of new area development and delta from Unison. 3) Aggressive regulatory support in MMR region.

Promoter/FII Holdings
Promoters held 32.5 per cent stake in the company as of 31-Mar-2025, while FIIs owned 23.76 per cent, DIIs 23.82 per cent.