Mahanagar Gas Ltd. share price target

Q2 results in line but margin remains above the cycle average; we raise FY24 EBITDA by 11% factoring in a strong H1

Mahanagar Gas (MGL)’s Q2FY24 EBITDA/PAT at INR 4.8/3.4bn missed our estimates of INR 5bn/3.5bn, but the company delivered a second successive quarter of strong YoY growth with EBITDA/PAT up 89/106% YoY. Volume growth of just 3.4% was muted, but INR 6.6/scm jump YoY in EBITDA/scm was enough to drive the earnings strength in the quarter.

Q1 ahead of consensus on margin surprise but soft CNG volumes for the third straight quarter worrying

Mahanagar Gas’ (MGL) Q1FY24 EBITDA/PAT at INR 5.2/3.7bn beat I-Sec estimates of EBITDA/PAT of INR 4.3/3bn, rising 83/99% YoY, respectively. Volume growth of just 1% was muted, but INR 7.7/scm jump YoY in EBITDA/scm (highest ever) was enough to drive the earnings strength in the quarter.

Post the Rs8/kg reduction in CNG prices at the beginning of Q1FY24, volumes have remained in the range of 3.45-3.65mmscmd (flat to 6% YoY growth) in Q1, with the beginning of summer vacations impacting bus volumes.