3 Midcap Stocks To Buy From The Oil & Gas Space On Which Sharekhan Is Bullish

Mahangar Gas

Sharekhan has a buy call on the stock of Mahanagar Gas with a price target of Rs 1010 on the stock. "Capping of domestic gas prices, a potential normalisation of international gas price benchmarks and softening of softening of spot LNG price would improve volume growth visibility and margin recovery for CGDs. We maintain our earnings estimate for MGL as government's approval of the Kirit Parikh recommendation is pending and expect MGL's PAT to clock 13% PAT CAGR over FY22-25E, along with healthy RoE/RoCE of 19%/24%. MGL is the cheapest CGD stock with attractive valuation of 11.3x FY24E EPS, which is at a 25% discount to its 3-year average PE multiple. Hence, we maintain a Buy rating on Mahangar Gas with an unchanged price target of Rs. 1,010.

IndraPrashtha Gas

IndraPrashtha Gas is another stock where Sharekhan is optimistic and has suggested a buy with a price target of Rs 510.

"A potential normalisation of international gas prices from FY25 would mean APM gas price could remain in the range of $4-6.5/mmtu. This would improve volume growth visibility (supported by widening of pricing gap between CNG versus petrol) and margin recovery for CGDs and with high exposure to CNG/D-PNG (accounts for 81% of IGL's overall volume of 8.1 mmscmd). We maintain our earnings estimates for IGL as government's approval of Kirit Parikh recommendation is pending. We maintain our Buy rating on IGL with a revised PT of Rs. 510 (increase reflects rollover of PE multiple to November 2024 earnings estimate) as lower domestic gas price would improve earnings visibility and valuation of 19.9x FY24E EPS is attractive given 17% discount to historical average one-year forward PE of 24x," the brokerage has said.

Gujarat Gas

This is another stock where Sharekhan has a buy call with a price target of Rs 560 on the stock. "We view the likely linking of domestic gas prices to crude oil price (as seen for long term LNG contracts) could sharply increase gas cost for CGDs in the elevated crude oil prices environment and could negatively impact CNG price differential versus petrol as historically government has controlled petrol/diesel prices despite both being deregulated. Further, it would be detrimental to government's aim to increase share of gas in India's energy mix to 15% by 2030 (versus 6% currently) and we expect the government to not accept recommendation of linking domestic gas price to crude oil prices," the brokerage has said.

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.