Target: ₹1,306

CMP: ₹1,071.50

Mahanagar Gas has posted overall volume sale of 303.49 million scm in Q4FY23 as against 285.26 million scm in Q4FY22 a growth of 6.4 per cent, with CNG and PNG volumes up by 5.8 per cent (y-o-y) and 7.8 per cent (y-o-y) respectively.

The overall revenue (net of excise duty) in Q4-FY23 is ₹1610.48 crore against ₹ 1,086.77 crore in Q4-FY22 exhibiting an impressive growth of 48.2 per cent, with CNG business posted a revenue growth of 61.9 per cent (y-o-y) to ₹1,138.19 crore, whereas total PNG revenue stood at ₹463.43 crore Vs ₹376.59 crore in Q4FY22.

The stock currently trades at 11.2x FY24e EPS of ₹92.63 and 9.5x FY21 EPS of ₹108.86. MGL aims to capitalise on opportunities within the CGD sector by increasing its customer base on the back of expansion distribution network – it plans to add 30-40 stations during year, while its PNG network will get a boost from expansion of in Raigad district.

Direct bidding and formation of strategic alliances would also help in volume growth of 5.5 per cent in FY24. On balance, we retain our with a revised target price of ₹1,306 (previous target of ₹1,012).