Mahanagar Gas Ltd. share price target

Gross margins fell | 9.1/scm YoY (| 7/scm QoQ) to | 8.6/scm on account of sharp increase in gas costs. Subsequently, EBITDA fell 67.4% YoY to | 103.1 crore (estimate: | 200.9 crore) PAT was at | 56.8 crore, down 73.9% YoY (estimate: | 130.4 crore) What should investors do? MGL's sales volume growth is expected to be subdued...

Sustainable volumes; margin recovery may be slower Mahanagar Gas (MAHGL) reported a miss on our estimates. Although, volumes were in-line at 3.1mmscmd (+13% YoY, flat QoQ), while EBITDA/scm was lower at INR3.4 (v/s our estimate of INR10 and INR10.5 in 2QFY22). Thus, EBITDA was at INR1b (-66% est., -67% YoY). The EBITDA margin contraction in 3QFY22 was attributable to a reduction in the APM gas allocation (due to supply cuts) and high LNG prices. The average cost of spot LNG stood at ~USD28/mmBtu for the company in 3Q....

We lower our FY22E estimates by 31% to factor in weak Q3 performance and reduce FY23/24E by ~7%, as we lower our margin assumption to Rs10.2/scm reduced domestic gas supplies. Q3 blended gas cost/scm was Rs25.2 (+90%Q/Q) which led to drop in gross margins at Rs11.8/scm (-36%Q/Q). Currently, government is working on revised gas allocation to better address reliance on high cost spot LNG prices. MGL remains a play on increased gas usage from rising vehicle and PNG penetration and we like the business, given its dominating share in growing...

Around 500 new CNG buses to be added in next two months; MGL in talks about retrofitting 185 BEST buses to CNG. We lower our estimates for FY23/24E by 3-10% as we lower our margin assumption to Rs11/scm (earlier Rs12.8-13) and increase our volumes by...

Considering all the above reasoning discussed, we recommend buying the stock in the range of 1090-1140, for...

Q1FY22 revenue grew 140.3% YoY (-14.9% QoQ) on higher volumes (currently surpassed pre-COVID levels) of 115.5% YoY to 218.3 Standard Cubic Meter (SCMmn) and improved realization of Rs. 30.6/SCM in industrial and commercial sales. MGL however saw a sequential dip owing to COVID-19 impact on volumes. PNG/CNG revenue stood at Rs. 255cr/Rs. 354cr with a sales volume of 141.1SCMmn (>70% of total volume)/~42.6SCMmn (+9.2% YoY) whereas PNG Industry/commercial volumes were 34.5SCMmn (+86.0% YoY). Blended volume was at 2.398MMSCMD with increasing domestic PNG demand (+2.4% QoQ) to 0.468MMSCMD (vs. 0.457MMSCMD...

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recovery in the second half got reflected in later quarters, however the second round of restrictions, though less severe, affected Q1FY22 revenues as it decreased by 14.2% on a sequential basis to Rs. 615.49 cr. As a result operating profit declined by 3.8% q-o-q q at Rs. 303.99 cr. In a higher operational cost environment, the management has hinted of successful...

Benign gas prices, private vehicle conversion to drive volumes and earnings. margins even as we leave volume assumptions unchanged. Record margins (-16% QoQ), due to lockdown restrictions. MGL remains a play on increased gas usage from rising vehicle and PNG penetration in a benign gas price environment. We continue to like MGL's business, given its dominating share...