Shares of Mahanagar Gas Ltd (MGL) came under pressure in Monday's trade following weak fourth quarter (Q4 FY26) results, as the company missed Street expectations amid rising gas costs and supply disruptions. The stock was last seen trading 5.01 per cent lower at Rs 1,113.20.

Nuvama Institutional Equities retained its 'Reduce' rating on the city gas distributor, citing near-term margin pressure and concerns over sector valuations amid policy uncertainty.

"MGL's Q4 FY26 EBITDA missed consensus estimate by 8 per cent on a spike in gas costs (+9 per cent) on weak INR and LNG supply disruptions resulting in EBITDA/scm crashing 38 per cent YoY," the domestic brokerage stated.

"Volumes expanded 6 per cent YoY with CNG/PNG growth at 7 per cent/4 per cent. PAT missed consensus by 21 per cent on lower other income (-31 per cent Yo)," it added.

According to Nuvama, rising input costs linked to geopolitical tensions in West Asia and rupee weakness could continue to weigh on margins in the near term.

"Near-term margin pressure expected on LNG supply disruptions due to West Asia tensions and sharp INR depreciation. MGL targets 10 per cent volume growth in FY27 on supportive government policies," Nuvama also said.

The brokerage further highlighted concerns around supply disruptions and higher sourcing costs.

Spillover impact likely in Q1 FY27

"Input gas costs are expected to rise due to shipping restrictions in the Strait of Hormuz on account of geopolitical tensions in the West Asia resulting in major LNG supply disruption. Additionally, the recent sharp INR depreciation has increased cost of input gas, being 100 per cent dollar-denominated. Management is optimistic of maintaining FY27E EBITDA/scm above Rs 8, we are cautious given Q4 EBITDA/scm of Rs 6.2 with adverse impact of the conflict spilling over into Q1 (FY27). Domestic gas prices have already shot up by ~2/3rd in Apr-May 2026 from March levels (although APM price is capped at $7/mmbtu, an increase of 0.25/mmbtu from FY26), impacting NWG prices (~10 per cent of sourcing mix)," the brokerage noted.

"Retain 'Reduce' due to near-term margin pressure and sector multiples de-rating due to ad-hoc government policies causing uncertainty (similar to OMCs, which trade at a considerable discount). Trades at 9x/7x FY27E/28E EV/EBITDA," Nuvama further stated.