Analysts expects IGL, MGL shares to rise by 34%, shares drop by 2%

Shares of city gas distribution (CGD) companies, Mahanagar Gas (MGL) and Indraprastha Gas (IGL), fell by up to 2% during intraday trading on Friday. IGL shares were upgraded from 'Reduce' to 'Add,' with a price target raised by 17% to Rs 450, indicating a potential upside of 7%.

Meanwhile, MGL shares were upgraded from 'Add' to 'Buy,' with a new price target set 21% higher at Rs 1,700, suggesting a potential upside of 34%. Additionally, the government has reinstated a significant portion of the Administered Price Mechanism (APM) gas allocation cut for compressed natural gas (CNG).

Starting January 16, 2025, CNG's share of the volume will increase to 51%, up from the previous 37%, according to filings by IGL, MGL, and Adani Total Gas.

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The recent reversal provides relief to CNG sellers, though it was an unexpected decision given recent developments, such as the rumored inclusion of gas under GST and the diversion of some APM gas due to LPG shrinkage, according to Emkay Global.

Emkay estimates that IGL and MGL may need to increase CNG retail prices by Rs 4-5 and Rs 2-3 per kg, respectively, to restore their margins before the allocation cut scheduled for October- November 2024.

Among the 36 analysts covering IGL, 16 have assigned a 'Buy' rating, six recommend a 'Hold,' and 14 suggest 'Sell'. For MGL, out of 32 analysts, 14 have a 'Buy' rating, six recommend a 'Hold,' and 12 advise selling.

Currently, shares of IGL are trading 0.57% lower at Rs 417.10, while shares of MGL are 0.067% higher at Rs 1,271.50, although they have dipped from earlier highs of the day.

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