Mahanagar Gas Limited (MGL) is set to experience significant growth following the central government's mandate for households with piped gas infrastructure to switch from LPG to PNG by June. This policy change is anticipated to boost MGL's volume growth into double digits from the current 8.3% reported for FY26.
The company's core business, compressed natural gas (CNG), which contributed 72% of its revenue in FY26, is expected to maintain steady growth. However, MGL's management forecasts that the PNG segment will drive overall volume growth. The company plans to add between four to five lakh PNG customers in the near term.
To support this expansion, MGL has allocated a capital expenditure of ₹1,200 crores for FY27 to enhance its network. The company is prioritizing market penetration over short-term profits, especially as alternative fuel prices remain volatile. Nevertheless, MGL faces execution risks, including potential delays in pipeline installation during the monsoon and competition for skilled labor.
“At around 10.8x FY28E P/E, valuations appear attractive offering scope for re-rating as margin pressures ease.”
Motilal Oswal Financial Services
Brokerages view MGL's stock valuation as attractive, given the expected earnings growth. Motilal Oswal Financial Services projects a 9% annual volume growth for MGL over FY26-28, noting that the company's valuation at approximately 10.8x FY28E P/E offers potential for re-rating as margin pressures ease.
MGL's strategic focus on expanding its PNG customer base comes at a time when the Indian government is pushing for cleaner energy solutions. This transition aligns with broader environmental goals and positions MGL as a key player in the country's energy landscape.
Background
MGL's strategic focus on expanding its PNG customer base comes at a time when the Indian government is pushing for cleaner energy solutions. This transition aligns with broader environmental goals and positions MGL as a key player in the country's energy landscape.
Looking ahead, MGL's ability to navigate execution challenges and capitalize on the growing demand for PNG will be crucial. Investors and stakeholders will be watching closely to see how the company manages its expansion efforts and whether it can sustain its growth trajectory.
