UBS rates Mahanagar Gas a 'buy'; ups price target by 14%

Brokerage firm UBS has given a ‘buy’ rating for Mahanagar Gas, citing better than expected volume growth as one of the key triggers. UBS has raised the price target for the stock to Rs 1,600 from Rs 1,400.

It states that earnings growth momentum could return given the company's focus on maintaining operating profit per standard cubic meter (EBITDA/scm) and on growing volumes.

UBS has also raised the volume/margin assumptions for FY22-FY25  by 4-5 percent and increased earnings estimate by about 10 percent.

According to a report in Mint, gas distribution companies are in the spotlight, after all the firms reported strong numbers for the December quarter . The report also said that the government’s commitment to bring natural gas under the Goods and Services Tax has created optimism among investors.

The Mint report adds that getting natural gas under GST will have many advantages to gas distribution companies. Companies will be able to charge input credit tax on operating expenses like other companies and for industrial consumers, this input tax credit will help in lowering gas feedstock costs.