Mahanagar Gas Ltd (MGL) has received an upgraded 'Buy' rating from financial services firm Geojit, with a revised 12-month target price set at Rs 1,352. This positive outlook arrives even as MGL shares have experienced a nearly 10% decline over the past three months, although the stock saw a modest 0.79% increase on Wednesday, closing at Rs 1,103.
Geojit's upgrade is primarily attributed to MGL's steady operational performance during the March 2026 quarter (Q4 FY26). The company demonstrated resilience despite challenges such as LNG supply disruptions and margin pressure, which impacted the broader industry.
Q4 FY26 Performance Highlights
During the fourth quarter of fiscal year 2026, MGL reported a consolidated revenue increase of 4.9% year-on-year (YoY), reaching Rs 2,259 crore. This growth was fueled by higher gas sales volumes and strategic pricing adjustments. The company's overall gas sales volume grew 6.2% YoY to 4.672 million standard cubic meters per day (mmscmd), supported by healthy demand across its key segments.
- Compressed Natural Gas (CNG): Volume increased by 7.2% to 3.349 mmscmd.
- Domestic Piped Natural Gas (DPNG): Volume rose 2.4% to 0.605 mmscmd.
- Industrial and Commercial: Volume saw a 4.8% increase YoY to 0.719 mmscmd, despite partial curtailment due to LNG supply disruptions.
Profitability Challenges and Future Outlook
Despite robust sales, MGL's profitability faced headwinds from elevated gas procurement costs and margin pressure. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) fell 34.2% YoY, with the EBITDA margin contracting by 690 basis points to 11.5%. Profit After Tax (PAT) also saw a significant decline of 46.3% YoY, settling at Rs 130 crore, primarily due to the deterioration in operating margin and increased gas sourcing expenses.
However, Geojit maintains a constructive long-term view on MGL. The brokerage highlights several factors underpinning this optimism:
- Strong infrastructure expansion initiatives.
- Consistent customer additions across domestic PNG and CNG segments.
- Supportive regulatory changes that simplify permissions and reduce road reinstatement charges, facilitating faster network deployment.
- Prioritized gas allocation ensuring uninterrupted supply to core segments.
MGL's management anticipates accelerated volume growth, further pipeline network expansion, enhanced customer connectivity, and continued calibrated pricing actions aimed at protecting margins. These strategic focuses are expected to drive the company's future performance and justify the 'Buy' rating from Geojit.