MGL, IGL, Gujarat Gas shares: What CNG vehicle registrations in Feb suggest

City gas distributors (CGDs) Mahanagar Gas Ltd (MGL), Indraprastha Gas Ltd (IGL) and Gujarat Gas Ltd are in focus, as February's CNG vehicle registrations normalised after January's seasonal high. Total OEM CNG vehicle registrations fell to 12,915 in February, down 39 per cent month-on-month (MoM), but up 3 per cent year-on-year.

While CNG volume, vehicle registrations, and adoption remained healthy over the last few months, the structural decline in APM gas allocation remained a big overhang, Antique Stock Broking said on Friday.

The domestic brokerage believes CGDs will prioritise volume growth over margins, as it does not foresee big price hikes, and felt the current margin levels to continue. "The conflict between sustaining CNG arbitrage and CGDs guiding for margin recovery makes both events mutually exclusive. We stay negative on the CGD space due to APM cuts capping margins, maintaining HOLD on MGL, Gujarat Gas, and SELL on IGL," Antique said.

The broking firm noted that CNG arbitrage against petrol and diesel remains the highest in Mumbai compared to Ahmedabad and Delhi. The current CNG price in Mumbai at Rs 78 per kg is 25 per cent and 13 per cent cheaper than petrol and diesel, respectively. In Delhi, at Rs 75.10 per kg, it is 21 per cent and 14 per cent cheaper. In Gujarat, CNG's discount stood at 16 per cent against petrol and 12 per cent against diesel.

"Following the APM deallocation, MGL and Gujarat Gas have raised CNG prices in their key GAs, whereas IGL has only implemented hikes in smaller GAs, keeping prices unchanged in Delhi, which accounts for nearly 70 per cent of its CNG volume. However, with the Delhi elections now concluded, a price hike in the city is expected soon," Antique said.

The brokerage said the weakening rupee continued to drag margins down for CGDs. Antique suggested 'Hold' on MGL and Gujarat Gas and 'Sell' on IGL. For Gujarat Gas, it suggested a target of Rs 410. It sees MGL at Rs 1,270 and IGL at Rs 160. The three stocks were down up to 4 per cent in Friday's trade.

IGL's sales fell 39 per cent MoM in February but rose 3 per cent YoY (7 per cent adjusted for days), while MGL's sales dropped 40 per cent MoM and 3 per cent YoY (flat when normalized for days). Gujarat Gas saw a lower 36 per cent MoM decline and posted a strong 10 per cent YoY growth (14 per cent adjusted for days), Antique Stock Broking said.

Despite a sharp sequential drop in sales, adoption levels remained strong YoY -- MGL at 44 per cent (up 11 per cent YoY), IGL at 26 per cent (up 2 per cent YoY), and Gujarat Gas at 31 per cent (up 7 per cent YoY).

"In 11MFY25, CNG registrations grew 10 per cent/20 per cent/20 per cent YoY and penetration up by 3 per cent/6 per cent/5 per cent for IGL/MGL/Gujarat Gas respectively. While volume growth was strong across all three companies in Q3 and the same is expected in Q4, the structural decline in APM gas allocation remains a big overhang," Antique said.