In a recent surge on the Bombay Stock Exchange, shares of city gas distributors Mahanagar Gas Limited (MGL) and Indraprastha Gas Limited (IGL) witnessed a notable increase of up to 6%, buoyed by the anticipation of robust volume growth. This jump occurred amidst a relatively subdued market environment, spotlighting the strong investor confidence in these companies.
Record performance and market outlook
MGL's record-breaking rally
MGL's shares reached an all-time high of ₹1,921, marking a 6% increase during Tuesday's trading session. This significant rise surpassed its previous record of ₹1,911.95, set earlier in September 2024. Since the start of the year, MGL has seen a stellar performance, with its stock value escalating by 61%, a sharp contrast to the BSE Sensex's increase of 15% over the same period.
IGL follows suit
Similarly, IGL's shares soared to ₹559.65, with a peak intraday high close to its record of ₹570.60 achieved at the beginning of September. The company has enjoyed a solid 33% rally this year, reflecting a strong market sentiment and investor optimism towards its growth prospects.
Analysts' viewpoint and growth projections
Upbeat projections by brokerage firms
Global brokerage firm UBS has placed a 'Buy' rating on both IGL and MGL, with target prices set at ₹700 and ₹2,400, respectively. UBS forecasts a significant improvement in IGL's volume growth, projecting an 8.2% compound annual growth rate (CAGR) from FY24 to FY27. MGL is also expected to witness a robust volume increase, with forecasts adjusting upwards by 7-11% for FY25-27.
HDFC Securities' volume growth anticipation
HDFC Securities' analysis highlights an accelerated infrastructure rollout by MGL, including the strategic acquisition of Unison Enviro's (UEPL) geographic areas, which is expected to foster a strong volume growth of 10.4% CAGR through FY26. The expansion into new regions alongside enhancements in CNG and LNG offerings are likely to bolster this growth trajectory.
Strategic moves and future prospects
Expanding market reach
With the acquisition of UEPL, MGL has expanded its reach into additional districts within Maharashtra and Karnataka, enhancing its ability to supply both Piped Natural Gas (PNG) and Compressed Natural Gas (CNG). This expansion is strategically aligned with national goals for reducing emissions and achieving net zero targets, further bolstered by plans to set up LNG filling stations nationwide.
Innovations in the two-wheeler market
Recent collaborations with major automotive players like Bajaj Auto and upcoming launches by TVF are set to revolutionise the CNG market for two-wheelers. These initiatives are expected to open up new customer segments and drive further volume growth for CGD companies, making it an opportune time to invest in stocks.
Final thoughts
As city gas distributors like MGL and IGL continue to expand and innovate, their prospects in the stock market look increasingly promising. With strong volume growth on the horizon and strategic initiatives underway, now is an advantageous time for investors to consider diving into this sector and invest in stocks. The consistent growth and robust market penetration of these companies underscore their potential as key players in India's energy sector.
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