Mahanagar Gas stock slumps 16% from recent high; is it a good time to buy?

livemint.com:

Mahanagar Gas (MGL) slumped 15% in the previous trading session to ₹1,329 apiece, and they are down 16% from a record high of ₹1,580 apiece. This sudden downturn occurred after the company reduced CNG prices to pass on benefits to end consumers. Investors anticipate that this move will likely impact the company's margins in the future.

In addition, global brokerage firm Citi has downgraded its rating on the stock from 'Buy' to 'Sell' and trimmed its target price to ₹1,405 from ₹1,480 apiece, which also impacted the investor's sentiment towards the stock. Amid this, domestic brokerage firm Nuvama Institutional Equities said the recent correction has provided a good opportunity to enter the stock. According to brokerage analysis, the stock is currently trading at 11 times the estimated earnings for FY25, representing a 26% discount compared to IGL's valuation of 15 times.

Nuvama believes that Mahanagar Gas is poised for further appreciation, given its favorable valuation relative to historical averages, supported by robust demand and expansion into new geographical areas (GAs). Notably, MGL boasts a debt-free status, substantial cash reserves exceeding ₹2 billion, and a dividend yield of 3%. Therefore, the brokerage maintains its 'buy' rating on the stock with a target price of ₹1,601 apiece.

This target price suggests a potential upside of 20.5% from the stock's most recent closing price. Also Read: Mahanagar Gas stock tumbles 16% to hit 6-week low after Citi cuts target price The company has recently implemented a reduction in CNG prices in Mumbai by ₹3.3 per scm ( ₹2.5 per kg), or 3.5%. According to estimates by Nuvama, a significant portion of this price reduction, approximately ₹1.7 per scm (51% of the price cut), is