Buy Mahanagar Gas Shares For A Target Price Of Rs 1285: Sharekhan

Brokerage firm Sharekhan has initiated a buy on the stock of Mahanagar Gas with a price target of Rs 1285 in its latest report.

According to the brokerage Mahanagar Gas is well-suited among city gas distributors (CGDs) to shield its margins from any cut in petrol/ diesel prices (going by media reports) given its industry-leading EBITDA margin would help it easily absorb Rs2-3/kg CNG price cut.

"Sharp differential of 26% between CNG and petrol prices in Mumbai and savings of 37% in CNG running costs versus petrol would significantly aid the shift to CNG going ahead. We model a gas sales volume CAGR of 6% over FY23-25E (in line with management guidance). Favourable CNG economics versus petrol offers scope for an upside to volume growth," Sharp differential of 26% between CNG and petrol prices in Mumbai and savings of 37% in CNG running costs versus petrol would significantly aid the shift to CNG going ahead. We model a gas sales volume CAGR of 6% over FY23-25E (in line with management guidance). Favourable CNG economics versus petrol offers scope for an upside to volume growth." Sharekhan has said.

"Mahanagar Gas is the cheapest City Gas Distribution stock with an attractive valuation of 11x/10x FY24E/FY25E EPS. Hence, we maintain a Buy rating on Mahanagar Gas with an unchanged price target of Rs. 1,285," the brokerage has said. The stock of Mahanagar Gas last closed at Rs 1050 on the Bombay Stock Exchange.

Disclaimer

The above stock recommendation is taken from the report of broking firm Sharekhan and is not a recommendation of either the author, nor Greynium Information Technologies Pvt Ltd. Greynium Information Technologies and the author 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 taking any investment decision.