Mahanagar Gas Q3 Results: Profit Dips 9.4% Amid Revenue Growth, Board Declares ₹12 Dividend

Introduction

Mahanagar Gas Limited (MGL) announced its financial results for the third quarter and nine months ended December 31, 2025, revealing a mixed performance. The city gas distributor posted a double-digit increase in revenue driven by strong volume growth across its segments. However, profitability was impacted by rising input costs, leading to a year-on-year decline in net profit. In a positive development for investors, the company's board approved a substantial interim dividend of ₹12 per share. The results prompted varied reactions from market analysts, with brokerages highlighting the company's operational strengths while noting concerns about margin pressures.

Q3 Financial Performance Analysis

For the third quarter of fiscal year 2026, MGL's revenue from operations grew by 11.58% to ₹2,265.97 crore, compared to ₹2,030.82 crore in the same period last year. This top-line growth was supported by an increase in total gas sales volumes. Despite the higher revenue, the company's net profit after tax saw a decline of 9.43%, falling to ₹201.97 crore from ₹223.00 crore in Q3 FY25. This squeeze on profitability was attributed to higher costs of materials consumed. The company's EBITDA for the quarter stood at ₹351 crore, a modest 4% increase from the previous year, while the operating margin saw a slight expansion to 17% from 16.4%.

Nine-Month Cumulative Performance

Looking at the performance for the first nine months of FY26, the trend of revenue growth against declining profits continued. Revenue from operations for the period increased by a robust 16.75% to ₹6,801.70 crore. However, net profit for the same period fell by 10.52% to ₹714.90 crore. The EBITDA margin for the nine-month period contracted by 294 basis points, settling at 19.24% compared to 22.18% in the corresponding period of the previous fiscal year, highlighting the sustained pressure from input costs.

Operational Highlights and Volume Growth

MGL demonstrated healthy operational performance with significant growth in gas sales volumes. For the nine months ended December 31, 2025, total volumes grew by 8.97% year-on-year. The growth was broad-based across all major segments. CNG sales, a key contributor, increased by 7.24%. The Piped Natural Gas (PNG) segment also showed strong momentum, with domestic PNG volumes rising by 7.53% and the industrial/commercial PNG segment recording an impressive growth of 18.76%. This consistent volume growth underscores the expanding customer base and increasing demand for natural gas in MGL's operational areas.

Dividend Declaration for Shareholders

In a move to reward its shareholders, the Board of Directors declared an interim dividend of ₹12 per equity share for the financial year 2025-26. This translates to a 120% dividend on the face value of ₹10 per share. The company has set Friday, February 13, 2026, as the record date to determine the eligibility of shareholders for this dividend payment. The dividend is scheduled to be paid out within 30 days from the date of its declaration.

Analyst Commentary and Market Outlook

The Q3 results drew varied responses from brokerage firms. CLSA maintained an 'outperform' rating on the stock with a target price of ₹1,560, noting that the net profit was 4% ahead of its estimates due to better-than-expected volumes and margins. CLSA highlighted that the 12% year-on-year growth in CNG volume surpassed its estimate of an 8% increase. On the other hand, JPMorgan held a 'neutral' rating with a target price of ₹1,270. While acknowledging that the earnings beat its estimates, driven by lower gas costs and a 12% volume increase, JPMorgan expressed that long-term growth concerns for the company remain.

Market Reaction and Stock Movement

Following the announcement, shares of Mahanagar Gas gained momentum. The stock was trading up by approximately 2% at ₹1,174.9 apiece in early trade on the Monday following the results. The stock has delivered a positive return of around 11% over the past month. However, its performance over the last year shows a decline of about 11%, reflecting the broader market volatility and sector-specific challenges.

Conclusion

Mahanagar Gas's third-quarter performance presents a picture of operational resilience offset by margin pressures. The company's ability to drive volume growth across both CNG and PNG segments is a positive indicator of its market position. However, managing input cost volatility remains a key challenge. The declaration of a healthy interim dividend provides a direct return to shareholders, but investors will likely monitor the company's ability to improve profitability and address long-term growth challenges in the coming quarters.