BofA raises Mahanagar Gas stock target to INR 1,720; maintains buy

On Thursday, BofA Securities analyst Bharat Subramanian increased the price target for Mahanagar Gas Ltd (NS:MGAS) to INR 1,720 from INR 1,670, while reiterating a Buy rating on the stock. The adjustment follows Mahanagar Gas’s fourth-quarter financial results for fiscal year 2025, which showcased a standalone EBITDA of INR 3.8 billion, exceeding the Bloomberg consensus by 7%.

Mahanagar Gas reported substantial volume growth, with total volumes reaching 4.2 million standard cubic meters per day (mmscmd), marking an 11% year-over-year increase. This growth was consistent across various segments, with Compressed Natural Gas (CNG) volumes rising by 9% year-over-year, despite a slight quarter-over-quarter dip. The Piped Natural Gas for Industrial & Commercial (PNG-I&C) segment saw an impressive 20% year-over-year growth, and PNG-Domestic volumes grew by 4% year-over-year.

The company’s EBITDA margins improved to INR 10 per standard cubic meter, up from INR 8.3 in the third quarter, attributed to a partial reversal of the APM gas allocation cut in January 2025. However, operating expenses increased to INR 7.2 per standard cubic meter, compared to INR 6.3 in the previous quarter, due to higher marketing and CSR expenditures, as well as increased maintenance costs.

Mahanagar Gas also announced a dividend of INR 18 per share, bringing the total dividend for fiscal year 2025 to INR 30 per share. In response to these financial outcomes and projections, BofA Securities raised its fiscal years 2025-2026 standalone EBITDA estimates by 4%. The revised price objective of INR 1,720 per share reflects marginally increased volume growth and margin forecasts.

The firm has also adjusted its income rating to 7, indicating expectations of the same or higher income, up from the previous rating of 8 which suggested the same or lower income. The recommendation to Buy is supported by the continued robust CNG vehicle registrations within the company’s geographical areas and an uptick in industrial volumes in GA-2 and GA-3.

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