Citi remains optimistic about the city gas distribution (CGD) sector, highlighting significant developments and a positive outlook. Here are the key points:
Key Highlights:
- APM Gas Allocation Restored: CGDs confirmed the restoration of APM (Administered Price Mechanism) gas allocation, exceeding market expectations. This move strengthens the supply chain and underpins the sector’s performance.
- Improved Margins: Margin risks have been nearly eliminated due to strong CNG (compressed natural gas) economics, which continue to favor CGDs despite challenging market conditions.
- Policy Complexities: While the restoration is a positive development, Citi warns that policy complexity may pose challenges for some investors in navigating the sector.
- Positive Catalyst for MGL: Citi reiterates its positive catalyst watch on Mahanagar Gas Limited (MGL), considering its favorable positioning and robust fundamentals.
Top Picks in the Sector:
Citi maintains a bullish stance on the following CGD players:
- MGL (Mahanagar Gas Limited)
- IGL (Indraprastha Gas Limited)
- GAIL (India Limited)
Outlook:
With APM gas allocation restored and margin pressures largely alleviated, the CGD sector is poised for steady growth. Citi’s top picks reflect companies that are well-positioned to capitalize on strong fundamentals and favorable market conditions.
Disclaimer: This article is for informational purposes only. Please consult your financial advisor before making any investment decisions.
