Target: ₹1,352
CMP: ₹1,074
According to Modern Intelligence report, India city gas distribution (CGD) is set to grow at a CAGR of 13 per cent during 2026-31. In order to capture the benefit of the growing CGD sector, Mahanagar Gas (MGL) added about 861 km to its aggregate steel and PE pipeline network (about 8,320 km) and 52 CNG stations (518 stations) in FY26. After investing over ₹1,060 crore in capital assets in FY26, MGL has drawn plans to further invest ₹1,000 crore for FY27.
CNG prices increased this fiscal which will result in better realisation, going ahead. As a result of lower natural gas prices, operating profit margin fell from 21.6 per cent in FY25 to 17.6 per cent in FY26 and operating profits fell to ₹1,451.1 crore in FY26. We expect operating margin to falter further due to volatile gas cost due to US-Iran war and subsequently margins to fall from about 17.6 per cent this fiscal to about 16 per cent in FY27.
Volatility in the pricing of natural gas matters more than physical sourcing as it is seller-agnostic, and the impact of war will harm them in increased costs and limited pass through rather than availability. With the goal of curtailing reliance on LPG, government efforts to push the adoption of PNG might help MGL to speed up new infrastructure roll-out and capture additional demand for piped gas. We assign ‘buy’ rating on the stock with target of ₹1,352, based on 15x FY27 earnings over 9-12 months.
Published on June 4, 2026
