Mahanagar Gas, a prominent natural gas solutions provider in India, revealed a robust performance in the December 2023 quarter, with a consolidated net profit of Rs 317.18 crore. This marked an impressive 84% increase from the Rs 172.07 crore recorded in the corresponding period last year, primarily attributed to lower gas costs.
During the third quarter, Mahanagar Gas reported an Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) of Rs 496.76 crore, indicating a substantial growth of 72.27% compared to the Rs 288.35 crore registered a year ago. JM Financial noted that the EBITDA margin was slightly better than anticipated at Rs 13.3/scm, thanks to the impact of lower average gas costs.
In response to the positive financial results, shares of Mahanagar Gas experienced a 2.8% gain in trade on January 24. As of 14.50 pm, the stock was trading at Rs 1,341.60 per share, reflecting a 2.23% increase from the previous session’s closing price.
Jefferies, maintaining its ‘buy’ recommendation, set a target of Rs 1,450 per share. The EBITDA exceeded Jefferies’ estimates by 19%, along with gross margins, driven by lower feedstock costs. Net profit also surpassed brokerage expectations by 23%.
JM Financial Limited reaffirmed its ‘buy’ rating on Mahanagar Gas, emphasizing valuations, robust pricing power, and consistent volume growth. Despite the positive outlook, key risks for the company include potential cuts in domestic gas allocation, sharp increases in spot LNG gas prices, or a rise in the penetration of electric vehicles.
Over the past six months, Mahanagar Gas shares have demonstrated an impressive growth of 25%, outperforming the Nifty 50, which gained approximately 9.5% during the same period. As the company continues its positive trajectory, investor interest remains high, driven by strong financial performance and strategic positioning in the natural gas sector.