Whereas electrical autos (EVs) proceed to seize headlines, their penetration—significantly within the mass section—is dealing with headwinds globally, inadvertently strengthening the outlook for CNG adoption and, by extension, the CGD ecosystem.
Structurally, the CGD sector is witnessing renewed investor curiosity as a consequence of constant quantity progress, margin enlargement potential, and supportive regulatory frameworks. In FY25, the CNG powertrain grew by ~35% YoY, establishing itself as one of many fastest-growing gas classes in India’s passenger car market.
Furthermore, CNG car penetration throughout main OEMs has expanded considerably, with fashions now forming as much as 25% of sure producers’ portfolio, in comparison with low double-digits only a 12 months in the past.
This development is additional strengthened by the launch of inexpensive CNG fashions within the sub-INR1 million class—a section the place EV penetration stays restricted.
Globally, slowing EV momentum is enjoying to the CGD sector’s benefit. Coverage tapering within the US and Europe has dampened EV gross sales progress, with revised projections chopping the anticipated oil displacement by EVs to only 5mb/d by 2030, half of which relies on China alone.Concurrently, elevated import tariffs in key markets in opposition to Chinese language EVs are creating bottlenecks in international EV provide chains, delaying broader adoption.In distinction, CNG is gaining share steadily, pushed by higher unit economics, infrastructure rollout, and OEM alignment with mass-market demand.
Authorities help continues to be a key enabler for CGD. Growth of the CGD community throughout new geographies and industrial zones—particularly in tier-2/3 cities—is catalyzing gasoline consumption.
Coverage continuity round cleaner mobility alternate options and price-linked incentives additional de-risk the section’s medium-term prospects.
In abstract, whereas EV adoption stays aspirational, the CGD sector is anchored in affordability, scalability, and infrastructure readiness.
With restricted aggressive disruption, sturdy coverage backing, and rising penetration in key auto segments, the CGD sector is structurally well-positioned for sustained progress over the following 3–5 years.
Mahanagar Gasoline: Purchase| Goal Rs 1760| LTP Rs 1370| Upside 28%
Mahanagar Gasoline stays a BUY, underpinned by sturdy fundamentals and robust progress visibility. Regardless of FY25 EBITDA/PAT declines, administration guides for 10% quantity CAGR over FY25-27, led by CNG demand, collaborations with OEMs, and assured value reductions for brand new PNG prospects.
The corporate targets important enlargement—including 250 CNG stations and upgrading current ones by FY30, with depot entry for business autos and robust uptake within the Mahotsav 2.0 scheme.
UEPL volumes are guided to develop 40% YoY in FY26, whereas forays into battery manufacturing, LNG, and CBG supply long-term earnings upside. We anticipate a ten% CAGR in quantity over FY25-27.
Gujarat Gasoline: Purchase| Goal Rs 535| LTP Rs 476| Upside 12%
Gujarat Gasoline is well-positioned for progress with an anticipated EBITDA margin of INR 5.6–5.8/scm for FY26/27, supported by decrease gasoline prices from falling LNG and crude costs and rupee appreciation.
The corporate targets 12% YoY CNG quantity progress and is increasing aggressively in Thane rural, Ahmedabad rural, and Rajasthan to seize industrial demand. Strategic infrastructure investments and efforts to spice up industrial gasoline adoption help sturdy quantity progress.
These components underpin a constructive margin and quantity outlook, reinforcing Gujarat Gasoline’s sturdy place within the rising gasoline distribution market.
(The creator is Head – Analysis, Wealth Administration, Motilal Oswal Monetary Providers Ltd.)
(Disclaimer: Suggestions, ideas, views, and opinions given by consultants are their very own. These don’t signify the views of the Financial Occasions)
