MGL, IGL shares discounted despite strong growth forecasts

Shares of Mahanagar Gas (MGL) and Indraprastha Gas (IGL) are currently priced lower than their historical average, despite a positive growth forecast. According to HDFC Securities, MGL is trading at 10.7 times its expected earnings for March 2026, while IGL is at 14.9 times. This puts both stocks at a discount of about 16% to 23% compared to their five-year averages. In the past six months, MGL's stock has increased by 7.45%, reaching ₹ 1,380. In contrast, IGL's shares have decreased by 3%. Despite these changes, both companies have outperformed the benchmark Sensex. Analysts attribute this outperformance to a recovery in domestic gas supply for city gas distribution. HDFC Securities expects both companies to benefit from cost-effective domestic gas and a rise in compressed natural gas (CNG) vehicle registrations. They predict that MGL will see a compound annual growth rate (CAGR) of 12% and IGL will see 9% growth from 2024 to 2027. New vehicle registrations for CNG have shown strong growth. In MGL's service areas, registrations for the fiscal year are up 24% year-on-year, while IGL has reported a 12% increase in the same period. This indicates a growing shift to CNG vehicles due to favorable pricing and an expanding retail network. Despite the positive outlook, both stocks remain below their historical averages. Analysts recommend buying both MGL and IGL shares, setting target prices of ₹ 2,000 and ₹ 258, respectively, which suggests significant potential for future growth. Investors are advised to seek expert advice before making investment decisions.