FIIs Stake Up 30.95% In This Debt Free Stock In Q4, Buy Says ICICI Securities

Mahanagar Gas is a mid cap energy company that recorded a market cap of Rs 10,308 Cr in Friday's closing session. On May 8, 1995, Mahanagar Gas Limited (MGL), one of India's top natural gas distribution companies, was established. Mahanagar Gas is one of the debt-free companies with a major FII holding, additionally the brokerage firm ICICI Securities has placed a buy call on the stock, which is fascinating.

In the fourth quarter of the fiscal year 2022-23, the company's net profit increased by 104% year on year to Rs 268.8 crore from Rs 131.8 crore in the same quarter the previous financial year. Mahanagar Gas declared a net profit of Rs 790 crore for the full FY23, 32% more than the Rs 596 crore earned in the preceding FY22. In Q4FY23, revenue from operations totaled Rs 1,771.8 crore, a rise of 67% over the Rs 1,187.6 crore recorded in the same quarter the previous year. The state-run corporation reported revenue from operations of Rs 6,920.96 crore for the full fiscal year 2023, which is 78 percent more than the Rs 3,884 crore reported in FY22.

As per the data of Trendlyne and Screener, Mahanagar Gas has a debt to equity ratio of 0 which makes it a debt free company indicating strong financials and low outgoing expenses.

During Q4FY23, the company reported promoters shareholding of 32.50%, FIIs stake of 30.95%, DIIs stake of 14.93%, Govt stake of 10.00% and public stake of 11.60%. As per the data of Trendlyne, promoters holding of Mahanagar Gas was flat at 32.50% in March 2023 quarter, FII/FPI stake up from 29.73% in December 2022 quarter to 30.95% in March 2023 quarter, number of FII/FPI investors grew from 230 to 231, mutual funds stake plummeted from 2.44% to 1.81% and institutional investors have increased their stake from 55.34% in Q3FY23 to 55.88% in Q4FY23.

Commenting on the outlook of the stock, the broking firm ICICI Securities have placed a buy call on Mahanagar Gas for a target price of Rs 1,290. "We remain bullish on MGL, with favourable multiples (at CMP, stock trades at just 10.0x FY25E EPS and 4.8x EV/EBITDA) and stronger prospects. Our DCF valuation, factoring-in conservative assumptions of 3% volume growth and long-term EBITDA/scm of ~Rs10/scm, delivers a target price of Rs1,290/sh. Maintain BUY," the brokerage said.

Higher gas prices, inability to pass on gas cost increases, sharper fall in prices of alternate fuels to CNG (petrol/diesel) are the key downside risks of the stock and ICICI Securities have highlighted softer LNG prices, faster development of new areas, aggressive regulatory support in the Mumbai Metropolitan Region (MMR) as the key upside risks for the stock.

On Monday, the shares of Mahanagar Gas opened on the BSE at Rs 1043.65 apiece. The stock made a 52-week-high of Rs 1,104.80 on (11/05/2023) and a 52-week-low of Rs 666.35 on (20/06/2022).