Mahanagar Gas Stock Price Target Set at Rs 1302 by Prabhudas Lilladher
Mahanagar Gas' Q4FY26 Performance Disappoints Despite Healthy CNG Volume Growth
Mahanagar Gas (MAHGL) has reported total volumes of 4.7 million metric standard cubic meters per day (mmscmd) in Q4FY26, marking a 1.1% and 6.1% increase on a quarter-on-quarter (QoQ) and year-on-year (YoY) basis, respectively. The company's CNG volume growth has been a notable highlight, with a 2.0% and 7.2% increase QoQ and YoY, respectively. However, PNG-D volumes remained flat QoQ but saw a 2.3% increase YoY. Industrial/commercial (I/C) volumes, on the other hand, declined 2.2% QoQ but increased 4.9% YoY.
Despite the healthy volume growth, the company's adjusted earnings before interest, taxes, depreciation, and amortization (Adj. EBITDA) declined significantly. The adjusted EBITDA, which was adjusted for trade discount reversal, dropped 26.1% and 21.5% QoQ and YoY, respectively, to INR 2.6 billion. This decline was largely due to a sharp rise in raw material costs, which increased 4.6% and 15.8% QoQ and YoY, respectively.
As a result, the adjusted EBITDA per standard cubic meter (scm) declined to INR 6.2/scm in Q4FY26, compared to INR 8.3/scm in Q3FY26. Higher depreciation and lower other income further impacted profitability, leading to a 34.7% and 33.0% decline in adjusted profit after tax (Adj. PAT) to INR 1.3 billion. For the full year FY26, EBITDA and PAT declined 11.2% and 23.3% YoY to INR 13.4 billion and INR 7.6 billion, respectively.
| Revenue Growth | QoQ | YoY |
|---|---|---|
| CNG Volume Growth | 2.0% | 7.2% |
| PNG-D Volume Growth | Flat | 2.3% |
| I/C Volume Growth | -2.2% | 4.9% |
| Adj. EBITDA Growth | -26.1% | -21.5% |
| Adj. EBITDA/scm | INR 6.2 | - |
The company's management expects recent policy measures for city gas distribution (CGD) to improve the medium-term volume growth trajectory. However, ongoing disruptions in West Asia have led to a revision in the company's volume growth estimates for FY27 and FY28 to 8.6% and 10.6% YoY, respectively. In addition, the research report has revised the adjusted EBITDA/scm expectation to INR 8.0/INR 8.6 for FY27/FY28E.
Based on these revised estimates, the company's valuation has been revised to 12x FY28E earnings per share (EPS), up from 10x earlier. The research report maintains an 'Accumulate' rating for the company, with a revised target price of INR 1,302, up from INR 1,114 earlier.
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