Mahanagar Gas share price has jumped nearly 5% after Motilal Oswal reiterated Buy on the stock with a target price of Rs 1,760 a share. It is one of their preferred pick in the City Gas Distribution space. The target implies an upside of nearly 30% from current levels.
According to them, multiple initiatives implemented by the company, such as collaborating with OEMs to drive conversions of commercial CNG vehicles and providing guaranteed price discounts to new I/C-PNG customers, will support further upmove in the share price.
Motilal Oswal on Mahanagar Gas: Volume growth guidance encouraging
Motilal Oswal expect a 10% volume growth on a compounded basis between FY25-FY27. They believe that this will be driven by the 40% YoY FY26 UEPL volume growth guidance given by the management. The long-term target volume of 1.2-1.3mmscmd (0.2-0.3mmscmd currently) also supports the higher target, as per Motilal Oswal.
Motilal Oswal on Mahanagar Gas: Earnings boost from
Further, the brokerage firm believes that the company’s foray into “battery manufacturing, LNG, and CBG businesses shall provide a boost to earnings in the long run.” The stock is currently trading at 11x “FY27 EPS,” as per Motilal Oswal.
Motilal Oswal on Mahanagar Gas: Crude price a major tailwind
“A weak crude price outlook along with a lower pricing slope for natural gas will reduce gas costs for CGD companies,” added Motilal Oswal. While Brent crude prices averaged $75.8/bbl in Q4FY25, they expect “Brent to average $65/bbl in FY26/FY27. We estimate every $10/bbl decline in Brent prices reduces the landed cost of natural gas by $2.3/mmbtu.” Further, there are indications that new long-term gas contracts are already being signed for a 1- 1.3% lower slope given the expected surge in LNG supply in H2FY26 and beyond. This also is seen as supportive of the higher share price target.
To conclude, Motilal Oswal believes that the recent CNG price hike and D-PNG price hike coupled with declining raw material costs in Q1FY26 would support the higher target set for this city gas distributor stock. The sequential appreciation is rupee is also seen as a positive factor helping reduce gas costs going forward.