Mahanagar Gas Ltd, the leading city gas distributor in Mumbai and surrounding areas, saw a strong opening in Monday's trade, with its shares reaching a new 52-week high. The strong rally in the stock comes on the heels of MGL's announcement on Friday that it had signed an agreement to acquire the rival private sector city gas distributor, Unison Enviro. This strategic move is expected to significantly strengthen MGL's position in the market.
According to the PTI report, Unison Enviro is a subsidiary of highway developer Ashoka Buildcon and is into city gas distribution in the districts of Ratnagiri, Latur, and Osmanabad in Maharashtra, and Chitradurga and Davanagere in Karnataka, to the domestic, commercial, industrial, and transport sectors.
This acquisition will enable MGL, which is a subsidiary of gas major Gail, to expand into these five new markets. Currently, it has the licence to sell natural gas only in Mumbai metropolitan region and in the neighbouring Raigad district, the report said.
"This transaction is of strategic importance as the extended footprint will scale our business activities across a larger network and customer base," Ashu Shinghal, MGL Managing Director, said.
The acquisition will help MGL expand its network within and beyond Maharashtra and offer its services to a broader customer base, thereby contributing towards long-term growth, he added.
The company's shares responded positively to the news, opening 1.44% higher at ₹920 apiece as against the previous close of ₹906.95, and strengthened further to mark a new one-year high of ₹984.30, up by 8.52%.
In the last one-year period, the stock gained nearly 35.70%, moving from ₹713 apiece to its current position of ₹967.50. At current levels, the stock is trading 45.48% higher than its 52-week low of ₹665.
For the October-December quarter of FY23, the company reported a 210% jump in its net profit at ₹172 crore, compared to a net profit of ₹57 crore in a similar quarter of last fiscal.
The revenue from operations during the quarter surged to ₹1,671 crore, an increase of 62.54% from ₹1,028 crore. The operating profit came in at ₹256 crore, a surge of 148% YoY, while the operating profit margin expanded by 500 bps to 15% in Q3 FY23.
Following the company's Q3 numbers, domestic brokerage firm ICICI Securities has retained its "buy" call on the stock with a target price of ₹1,050 apiece.
28 analysts polled by MintGenie on an average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.