Mahanagar Gas (MGL)
StalwartFairStock Score: 81/100 — HIGH CONVICTION
Score breakdown: P/E: 2/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 1/1
Key Financials
| Current Price | ₹1,138.7 |
| Market Cap | ₹11,247.82 Cr |
| P/E Ratio | 15.72 |
| ROCE | 22.89% |
| ROE | 16.42% |
| Dividend Yield | 3.2% |
| Profit Growth | -39.3% |
| Debt/Equity | 0.03 |
| Sales Growth | 13.9% |
| Free Cash Flow | ₹354 Cr |
| Promoter Holding | 32.5% |
| 52-Week Range | ₹900 — ₹1,378 |
| Sector | Gas |
| Book Value | ₹650.7 |
Strengths
- Strong balance sheet with debt/equity of 0.04, Altman Z-Score of 3.20 and Piotroski F-Score of 7/9.
- High capital efficiency: ROE of 16.42% and ROCE of 22.89%.
- Positive free cash flow of ₹354 Cr and dividend yield of 2.46%.
- Topline momentum: sales growth of 20.20% and latest quarter revenue of ₹2,058 Cr.
- Earnings-based valuation appears reasonable: P/E of 12.46 and Graham Number of ₹1,145.88 close to the current price.
Concerns
- Profit growth is negative at -8.91% despite 20.20% sales growth, indicating margin compression.
- DCF intrinsic value of ₹178.76 is far below the market price of ₹1,135.55; margin of safety is -6.45%.
- P/B of 1.90 means paying a premium over book value of ₹596.22.
- Latest quarter net profit of ₹202 Cr is modest relative to sales of ₹2,058 Cr, leaving limited cushion if input costs rise.
AI Analysis
Mahanagar Gas operates a service-based city gas distribution business. I like the basic economics: high returns on capital, low leverage, and cash generation. ROCE at 22.89% and ROE at 16.42% show a solid franchise, while debt/equity of 0.04 means the company does not depend on lenders. Free cash flow of ₹354 Cr supports the 2.46% dividend. These are qualities Graham taught me to seek: financial strength and an ability to earn on owner capital. However, the latest scoreboard blurs. Sales grew 20.20% but profits fell 8.91%. That tells me the topline is expanding while margins are under pressure. The latest quarter's net profit of ₹202 Cr on ₹2,058 Cr of sales is decent, but gas-distribution margins can swing with input costs and pricing. The reported DCF intrinsic value of ₹178.76 is far below the market price of ₹1,135.55. Even after allowing for conservative assumptions, I cannot ignore that gap. The Graham Number of ₹1,145.88 is close to the price, but my rule demands margin of safety. At current levels, there is no margin of safety; the MoS is -6.45%. Mr Market is not offering me a bargain. The Piotroski F-Score of 7/9 and Altman Z-Score of 3.20 confirm no fear of bankruptcy. This is a quality utility-like operator, but a value investor buys the gap between price and intrinsic worth, not simply a good company. Despite the high FairStock Score of 87, I would place MGL in the Stalwart drawer and wait for a better price or a recovery in earnings that closes the DCF gap.
Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer