Q2 earnings spark mixed analyst views on Mahanagar Gas; buy, sell, or hold

MGL Share  Buy or Hold: Brokerages remain divided on Mahanagar Gas (MGL), even as they largely maintained their existing ratings following the company’s second-quarter results for FY26. Analysts at Motilal Oswal Financial Services (MOFSL) reaffirmed a Buy rating with a target of ₹1,700 per share, while Nuvama Institutional Equities retained a Reduce rating at ₹1,178. JM Financial maintained its Add call with a target of ₹1,415.  The divergence in brokerage views comes amid a 40 per cent quarter-on-quarter decline in net profit to ₹191.3 crore, reflecting near-term margin pressures, even as the company’s medium-term growth trajectory in volumes remains intact.  Amidst this, Mahanagar Gas shares were trading with gains of 0.31 per cent from the previous close, at ₹1,275.45 per share at 10 am on Friday, October 31. 

During Q2FY26, MGL reported revenue of ₹2,256.3 crore, up 1.1 per cent from ₹2,083 crore in the previous quarter. The company’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) declined 32.5 per cent Q-o-Q to ₹338 crore, translating to Ebitda margins of 16.5 per cent, down from 24 per cent in the prior quarter. 

 

MGL’s Q2FY26 results, analysts said, highlight near-term margin pressures, even as volume growth remains steady.

MOFSL: Ebitda margin below estimate; medium-term outlook healthy

 

MOFSL analysts reaffirmed their Buy rating, valuing MGL at 15x Dec’27 P/E, unchanged from earlier, resulting in a target of ₹1,700 per share. They expect MGL’s volumes to grow at an 11 per cent CAGR over FY25-28, with Ebitda per standard cubic meter (scm) of ₹8.7–9.2 during the period. MOFSL highlighted multiple initiatives driving growth, including collaborations with OEMs to boost commercial CNG vehicle conversions and guaranteed price discounts for new I/C-PNG customers. The management expects volumes to rise over 10 per cent YoY, with Ebitda margins sustaining at ₹8–9/scm in the medium term.

 

The brokerage noted, “However, we have marginally trimmed our Ebitda/scm estimates to ₹9.2/8.7/8.7 for FY26/27/28, reflecting a more conservative margin outlook. Consequently, our Ebitda estimates for FY26-28 are lower by 2–3 per cent, while PAT estimates have been revised down by 5–8 per cent, factoring in higher depreciation post-amalgamation and a reduction in other income assumptions.” 

Nuvama: Q2 miss on weak margins; guidance cut

Analysts at Nuvama retained a Reduce rating, citing sectoral multiple de-rating due to ad-hoc government policies causing uncertainty, similar to oil marketing companies. The brokerage further highlighted that management has cut FY26E Ebitda margin guidance to ₹8–9.5/scm from ₹9–9.5/scm on account of a weaker rupee, lower prices of alternate fuels, the margin-dilutive UEPL merger, and an inferior gas sourcing mix.

 

Nuvama observed that MGL’s Q2FY26 Ebitda missed estimates by 14 per cent/13 per cent on lower Ebitda per scm (-16 per cent), partly offset by higher volumes (+2 per cent). Ebitda per scm plunged 25 per cent YoY due to a 16 per cent rise in gas costs and a 6 per cent increase in operating expenses. Volumes expanded 9 per cent YoY, driven by growth in CNG and PNG segments at 7 per cent and 15 per cent, respectively. The brokerage also noted that CNG vehicle additions remained healthy, with 27,150 in Q2 and another 10,000 in October. 

JM Financial: Weak margin led to earnings miss; volume largely in-line

JM Financial maintained an Add rating with an unchanged target of ₹1,415, citing that the recent correction in share price has largely factored in concerns over ongoing structural reductions in APM gas allocation. The brokerage also emphasised MGL’s potential to deliver a 7–8 per cent volume CAGR over the next 3–5 years.

 

Following the amalgamation of its 100 per cent owned subsidiary UEPL, effective February 1, 2024, Q2FY26 financials and volumes include UEPL, making historical comparisons slightly challenging. JM Financial noted that MGL’s Ebitda (including UEPL) was below expectations at ₹8.0/scm versus their estimates of ₹9.4/scm, while sales volumes adjusted for UEPL were broadly in line.