Nomura has issued a mixed outlook for city gas distribution (CGD) players, highlighting near-term challenges from falling APM gas allocation and competitive pressures in the industrial segment.
According to the brokerage, declining availability of APM gas (administered pricing mechanism) remains a headwind, but companies may offset this through price hikes. Meanwhile, state-driven EV policies are expected to weigh on long-term CNG demand growth.
Nomura believes the inclusion of natural gas under GST would be structurally positive for the sector, with Gujarat Gas Ltd (GGL) likely to benefit the most from such a reform. However, due to high competitive intensity in GGL’s industrial gas segment, it remains Nomura’s least preferred pick.
Here’s how Nomura rates the key players:
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Mahanagar Gas Ltd (MGL): Buy, Target Price ₹1,680
– Favoured for its robust business model and margin profile. -
Indraprastha Gas Ltd (IGL): Neutral, Target Price ₹210
– Steady outlook but lacks near-term catalysts. -
Gujarat Gas Ltd (GGL): Reduce, Target Price ₹406
– Faces pricing pressure in industrial segment and margin risks.
The brokerage reiterated that while structural tailwinds remain, policy uncertainty and competition are key monitorables for the sector.
Disclaimer: The views expressed are those of the brokerage firm and do not constitute investment advice by Business Upturn. Investors are advised to consult financial experts before making investment decisions.