Mahanagar Gas Targeted at Rs 1352 by CD Equisearch
Mahanagar Gas Posts 11.4% Growth in Q4FY26 Volumes
Mahanagar Gas (MGL) has reported a 11.4% year-over-year (y-o-y) growth in overall volumes in Q4FY26, reaching 420.5 million standard cubic meters (scm). This marks a significant increase from the 377.44 million scm recorded in Q4FY25. The CNG and PNG volumes also showed notable growth, with CNG volumes up by 14.1% (y-o-y) and PNG volumes up by 5.1% (y-o-y) respectively.
Revenue Growth and Operating Profit
MGL's overall revenue (net of excise duty) in Q4FY26 was Rs 2051.22 crores, a 4.5% increase from the Rs 1962.52 crores recorded in Q4FY25. The CNG business posted a revenue growth of 13.2% (y-o-y) to Rs 1479.23 crores, while total PNG revenue stood at Rs 558.07 crores versus Rs 546.93 crores in Q4FY25. However, the company reported a de-growth of 34.1% in operating profit to Rs 260.34 crores in Q4FY26, compared to Rs 394.97 crores in Q4FY25. The operating profit margin (OPM) fell to 12.7% in Q4FY26, from 20.1% in Q4FY25, mainly due to readjustment in sourcing mix.
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Outlook and Recommendations
Despite the challenges in passing on increased CNG prices, which may fail to catalyze margins, the current valuation of MGL barely reveals its competitive edge in gas distribution. Based on this analysis, we assign a 'buy' rating on the stock with a target of Rs 1352, based on 15x FY27 earnings over a period of 9-12 months.
| Q4FY25 | Q4FY26 | Growth | |
|---|---|---|---|
| Overall Volumes (scm) | 377.44 million | 420.5 million | 11.4% |
| CNG Volumes (y-o-y) | - | 14.1% | |
| PNG Volumes (y-o-y) | - | 5.1% | |
| Revenue (net of excise duty) | Rs 1962.52 crores | Rs 2051.22 crores | 4.5% |
| CNG Revenue (y-o-y) | - | 13.2% | |
| PNG Revenue | Rs 546.93 crores | Rs 558.07 crores | - |
| Operating Profit | Rs 394.97 crores | Rs 260.34 crores | -34.1% |
| Operating Profit Margin | 20.1% | 12.7% | - |
Note: The table above provides a comparison of key financial and operational metrics between Q4FY25 and Q4FY26.
Read also: India Seeks Resolution of ONGC Dues in Talks with Venezuela
Investor Takeaway
Investors should be cautious about the potential impact of higher natural gas prices on Mahanagar Gas's operating profit.
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