Mahanagar Gas Stock Outlook: Why Investors Remain Positive Despite Margin Pressure

Mahanagar Gas' Quarterly Performance

Mahanagar Gas (MGL) has reported a decline in its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) per scm (standard cubic meter) to a 13-quarter low in the second quarter of the financial year 2026. This decline is mainly due to the depreciation of the Indian rupee (INR) and a significant increase in US Henry Hub (HH) prices.

Key Factors Affecting Margins

• INR depreciation: A weaker rupee makes imports more expensive for MGL.
• Jump in HH prices: A 30% increase in HH prices to around $5/MMbtu (million British thermal units) from less than $4/MMbtu in the previous quarter.

Measures to Ease Pressure

To mitigate the impact, MGL has raised prices for CNG (Compressed Natural Gas) and domestic PNG (Piped Natural Gas) by INR 0.5/scm each, effective September 4, 2025. Additionally, the company has reduced its HH offtake to around 60% of the total.

Investment Outlook

Despite the margin pressure, investors remain positive about MGL due to its stellar volume growth and improving LNG (Liquefied Natural Gas) pricing. The company's attractive valuations also support its stock. Considering these factors, the EBITDA margin assumption has been revised downward by INR 0.1-0.2/scm for the financial years 2026-2028. The target price for MGL has been revised to INR 1,535 from INR 1,525, with a BUY recommendation.

Disclaimer: This article provides general information and should not be considered as investment advice. It's always recommended to consult with certified experts before making any investment decisions.