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Mahanagar Gas Upgraded To 'Buy' As It Offers Better Growth At Attractive Valuation, Says Nomura
- Nomura has upgraded Mahanagar Gas Ltd. to a 'buy' rating from 'neutral', setting a target price of Rs 1,680 per share.
- The upgrade is based on MGL's better growth prospects and attractive valuation compared to its peers.
- Key factors for the upgrade include strong expected volume growth and limited exposure to volatile industrial and commercial segments.
- Challenges posed by the recent 18-20% reduction in gas allocation under the Administered Price Mechanism were addressed in the report.
- Despite the allocation cut affecting supply of cheap APM gas for priority sectors like CNG and domestic PNG, MGL and IGL managed to mitigate the challenge with price hikes.
- Gujarat Gas Ltd. faced challenges in the industrial and commercial segment due to low-cost propane gas and limited room for CNG business growth.
- State policies promoting electric vehicle adoption continue to pressure CNG growth, with potential policy actions targeting CNG vehicles in Delhi.
- Inclusion of natural gas under the GST regime could benefit businesses by streamlining tax structure and potentially reducing tax burden.
- Nomura prefers MGL as its top pick due to highest expected volume growth and attractive valuation, while GGL is the least preferred pick.
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