Home / Markets / Stock Markets /  RIL, GAIL, IGL, MGL: Which gas stocks to buy/hold after price hike?

The government's decision to raise the domestic APM gas price will negate the benefit of increased APM gas allocation to CNG players since August due to limited room to increase prices given worsening economics, said global brokerage Jefferies.

“GAIL LPG profitability will fall sharply with rise in feedstock cost. Allocation of HPHT gas from RIL's KG field by end-CY22 and new pricing formula from a govt appointed committee could provide some respite. Reliance Industries (RIL) marginal beneficiary, GAIL, IGL and Mahanagar Gas Ltd (MGL) key losers," the note stated.

The brokerage house has Hold rating on GAIL shares with a target price of 80 and also has Hold stance on Mahanagar Gas shares with a target price of 870 apiece. Meanwhile, it has recommended Buy on IGL and Reliance Industries (RIL) shares with target prices of 455 and 3,100 respectively.

The price of natural gas has been raised by 40% to a record high in line with firming up of global energy prices spurred by the Ukraine crisis. The price of gas produced from old fields has been increased to $8.57 per million British thermal unit (mmBtu) from $6.1/mmBtu, as per the government's notice. This price would be applicable from 1st October 2022 for a period of six months, i.e., until 31st March 2023. 

The increase in domestic gas prices was widely anticipated, as high international gas prices begin to get factored in the domestic gas pricing formula, as per analysts.

Another brokerage PhillipCapital has Hold rating on IGL with target price of 422, whereas it has Buy tag on MGL with TP of 952 and Petronet LNG with TP of 262. “CGD players could delay the hike in CNG and D-PNG prices in anticipation of some relief from the government on domestic APM gas pricing. In absence of any such relief, CGD volume growth could get impacted if the full increase in gas cost is passed through to end consumers," the brokerage's note said.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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