Mahanagar Gas falls 13% after Citi downgrades stock to ‘Sell’ from ‘Buy’

Citi lowered its target price for the stock from Rs 1,480 to Rs 1,405, expressing concerns about exclusivity and margins. The brokerage is closely watching potential downside catalysts over the next 90 days.

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Shares of Mahanagar Gas Ltd fell over 13 percent lower on March 6 after brokerage firm Citi downgraded the stock to ‘Sell’ from ‘Buy’ and cut its target price.

At 10 am, the stock was trading at Rs 1,363 on BSE, down 13 percent from its previous close. On Wednesday, India’s benchmark Sensex fell 0.25 percent to 73,491 points.

The brokerage downgraded the stock as Oil Minister Hardeep Puri emphasised that the full benefits of natural gas sector reforms haven’t reached end customers.

Puri stated the government’s commitment to ensuring compliance by city gas companies for affordable rates. Monopolies in licensed areas have led to strong profits for city gas firms, and Puri emphasised the need for enforcement.

Also, MGL has reduced the price of compressed natural gas (CNG) to Rs 73.50/Kg effective from midnight of March 5, 2024/ morning of March 6, 2024, the company said on Tuesday.

Citi lowered its target price for the stock from Rs 1480 to Rs 1405, expressing concerns about exclusivity and margins. The brokerage is closely watching potential downside catalysts over the next 90 days.

Despite legal challenges, efforts to end monopolies by the Petroleum and Natural Gas Regulatory Board are ongoing. Puri also highlighted the need for better price stability and long-term visibility of supplies in the gas sector, with expectations of India’s natural gas consumption rising to 500 mmscmd by 2030. The latest city gas licensing round covers 103 districts, requiring an investment of Rs 41,000 crore for infrastructure development, the ET report said.

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