Mahanagar Gas share price rises 5% following CNG, PNG price hikes in Mumbai. Should you Buy, Sell or Hold the stock?

Stock Market Today: Mahanagar Gas share price gained more than 5% in the opening trades on Tuesday following news of price hikes being taken by it in Mumbai for Compressed Natural Gas and Piped Natural Gas.

Mahanagar Gas share prices that opened at ₹1,752.20, higher than the previous closing price of ₹1669 went on to rise to ₹1762.25, marking gains of more than 5%.

The distributor of natural gas Mahanagar Gas has increased the prices of CNG by ₹1.50 kg, making the total cost, including taxes, to ₹75 kg. With taxes included, the price of their domestic PNG increased by ₹1 to ₹48 per standard cubic meter (SCM). Both rates are in force as of midnight on July 9th, suggested news reports

The scope for taking price hikes remained feasible for Mahangar Gas looking at the arbitrage that existed between gas CNG prices and petrol and Diesel prices in Mumbai

Also Read- Mahanagar Gas increases CNG and domestic PNG prices in Mumbai, Report: Check latest rates IGL and Gujarat Gas

The scope for taking price hikes remained feasible for Mahanagar Gas looking at the arbitrage that existed between CNG prices and petrol and Diesel prices in Mumbai.

As per analysts at Antique Sstock Broking, despite the cut in petrol and diesel prices in Mumbai, arbitrage versus CNG still remains the highest compared to Ahmedabad and Delhi. CNG prices in Mumbai were 29% and 18% cheaper versus petrol and Diesel . In, Delhi CBG is 21% and 14% cheaper than petrol and Diesel wile in Ahmedabad 22% and 18% cheaper respectively.

With the price hikes the profitability of Mahanagar Gas thereby is set to rise while CNG still remains adequately cheaper over Petrol and Diesel thereby making keeping demand outlook firm for cheaper and cleaner fuel.

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The City Gas distribution companies as Indraprastha Gas Ltd, Mahanagar Gas and Gujarat Gas share prices have been rising off late and are up more than 10% in one month on softening gas prices. The challenges on volume growth still remain due to rising EV penetration, say analysts.

During the quarter ending June 2024, the city gas distributors as Indraprastha Gas and Mahanagar Gas are likely to see flat to marginal 1% sequential volume growth as per Kotak Institutional Equities. For Mahanagar Gas lower base of last year i.e Q1FY24 when Mahanagar Gas had seen 2.3% yoy volume decline, CNG volume will look optically strong, observed Kotak Institutional Equities. They expect Mahangar Gas's unit Earnings before interest tax depreciation and amortisation to decline further to Rs10.5 per standard cubic meter (from Rs11.5 per scm sequentially) as per Kotak estimates.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions