Midcap Gas Distribution Stock Rallied 8.72%, Hits New 52-Week High, Buy, Says ICICI Securities

ICICI Securities has come up with a new investment idea in Mahanagar Gas Ltd. (MGL), a midcap Oil & Gas Sector company engaged in the Gas Distribution industry. The brokerage has assigned a "buy" on the stock with a target price of Rs 1,125 apiece. It claims an upside of up to 15% if stock is purchased at the current market price. The stock has a market capitalisation of Rs 9,739 Crore.

Mahanagar Gas' Stock Performance

The stock of Mahanagar Gas today rallied 8.72%, and closed at Rs 985.95 apiece. It hits the new 52 week high at Rs 989.50 apiece, meanwhile, its 52 week low was recorded on 20 June 2022 at Rs 665.80 apiece.

The stock has given 12.85% positive return in the past 1 week, 11.79% in the past 1 month and 9.65% in the past 3 months, respectively. It gained 37.64% in the past 1 year. However, in the past 3 years, it has fallen 1.31% and in the past 5 years, it has fallen 3.21%.

ICICI Securities Recommends "buy" stock with a Target Price of Rs 1,125/share

ICICI Securities said, "At CMP, the stock trades at 8.9x FY25E EPS and 3.9x EV/EBITDA, which we believe offers attractive risk reward. We remain bullish on MGL for next 12-18 months. We estimate an EPS CAGR of 19% over FY23-FY25E, supported by volume CAGR of ~9%, gross margins of Rs14.7/scm and EBITDA/scm of Rs9.6/scm.

It added, "With a strong signal to secure long-term growth via inorganic acquisitions, prospects appear bright. We value the core business via DCF methodology at Rs1,075/sh (WACC @10.9%, EBITDA/scm @Rs 9.5, TV growth at 1.5%). We have also tried to do a roughcut DCF valuation of the newly acquired areas (WACC @10.8%, EBITDA/scm Rs6, TV 3.5%), which works out to Rs50/sh. This leads to a target price of Rs1,125/sh for MGL implying 24% upside. Maintain BUY. "

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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 consult with certified experts before making any investment decision.