MGL - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.1

MGL offers a solid value proposition with strong return ratios, low debt, and attractive valuation. Despite recent profit decline, its fundamentals and dividend yield make it a compelling long-term hold.

📊 Financial Overview

• Revenue Growth: FY25 revenue rose 10.6% YoY to ₹7,590 Cr, driven by CNG and PNG sales

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• Profit Margins: Net profit declined 19% YoY due to rising input and tax costs

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• Return Metrics: ROCE at 22.9% and ROE at 17.7% — strong capital efficiency
• Debt Profile: Debt-to-equity ratio of 0.03 — nearly debt-free
• Cash Flows: Operating cash flow of ₹1,368 Cr supports dividend sustainability

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📈 Valuation Metrics

• P/E Ratio: 12.7 — significantly below industry average of 19.9
• P/B Ratio: ~2.0 — reasonable given asset base and earnings
• PEG Ratio: 0.71 — suggests undervaluation relative to growth
• Intrinsic Value: Estimated around ₹1,400–₹1,500 based on earnings and sector multiples

🏢 Business Model & Competitive Edge

• Core Operations: MGL is a leading city gas distributor in Mumbai and surrounding regions
• Moat: Monopoly in key urban markets with long-term infrastructure and regulatory licenses
• Growth Drivers: Expansion into new geographies and rising CNG/PNG adoption

📌 Entry Zone Recommendation

• Suggested Entry: ₹1,200–₹1,260 — near 52-week support and below DMA50
• Technical Indicators: RSI at 43.4 (oversold zone), MACD negative — potential for rebound

📈 Long-Term Holding Guidance

• Strong fundamentals, low debt, and consistent cash flows make MGL a reliable long-term hold
• Attractive dividend yield of 2.37% enhances total return potential

✅ Positive

• Strong ROCE and ROE
• Low valuation multiples (P/E, PEG)
• Debt-free with healthy cash flows
• Stable dividend yield

⚠️ Limitation

• Qtr profit declined 32.6% due to cost pressures
• FII holding dropped by 1.89%
• MACD and RSI suggest weak short-term momentum

📰 Company Negative News

• FY25 net profit dropped 19% YoY despite revenue growth

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🌟 Company Positive News

• Revenue grew 10.6% YoY; strong operating cash flow of ₹1,368 Cr

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• Dividend payout maintained despite profit dip

🏭 Industry

• Industry P/E at 19.9 — MGL trades at a discount
• City gas distribution sector poised for long-term growth with rising clean energy demand

🧾 Conclusion

• MGL is a fundamentally sound, undervalued stock with strong returns and low risk
• Ideal for long-term investors seeking stable income and capital appreciation

Sources

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Value Research

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Simply Wall St