The share price of Mahanagar Gas Ltd (MGL) rallied over 4 percent on Wednesday after global brokerage CLSA raised the target price on the stock. The stock price gained as much as 4.3 percent to an intraday high of Rs 907.50 apiece on the BSE.

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CLSA maintained a 'Buy' rating on the stock and raised the target price to Rs 1,310 per share from Rs 1,299 earlier. The brokerage also raised FY21 EPS by 40 percent on account of the company’s Q2 and faster rebound.

CLSA said that MGL's improved volume and margin outlook should shrink its 50 percent discount to Indraprastha Gas PE.

The brokerage is of the view that MGL offers attractive risk-reward at current levels.

Credit Suisse remains positive on the stock as it believes that MGL’s valuations are reasonable at current levels. It has maintained 'Outperform' rating with a target price of Rs 1,175 per share.

Speaking to CNBC-TV18, Mahanagar Gas’ Deputy MD, Deepak Sawant said that the company was in discussions with oil marketing companies (OMCs) for an increase in trade margins.

“OMCs are asking to double up the trade margins. However, we have kept contingent liability every year as per the formula,” Sawant said.

CNG volumes will increase from current levels with the addition of new stations, he added.

On Q2 numbers, Sawant said margins have improved due to decline in gas prices. Volumes will be around 2.5 mmscmd by the end of this year, he said.

“We have reached 100 percent of pre-COVID volumes,” he added.

At 1:25 pm, shares of Mahanagar Gas Ltd were trading 3.83 percent higher at Rs 903.10 apiece on the BSE as against a 0.11 percent loss in the benchmark Sensex.

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