Mahanagar Gas Ltd. share price target

Muted performance all around: Mahanagar Gas' (MGL's) reported weak results in Q1FY21 with EBITDA and PAT at Rs800mn (PLe: Rs893mn; 71%YoY) and Rs452mn (PLe: Rs548mn; -73%YoY) respectively. Lower operating profit was due to weak volume, partly compensated by better than expected margins. For Q1, MGL's gross margins were at Rs17.6/scm vs Rs17.9 in Q4, but higher opex/scm at Rs8.2/scm (due to lower volumes) led to...

Weak gas prices to drive margins, given MGL's pricing power; we model EBITDA margin of Rs. 9.8/Rs. 10.7 per scm for FY21E/FY22E. Mahanagar Gas Limited's (MGL), a dominant city gas distribution (CGD) player in and around Mumbai, is expected to benefit from weak domestic gas prices, (that are likely to fall further over H2FY2021E-H1FY2022E after a sharp 53% reduction since 2015 to $2.4/mmBtu), which would drive MGL's margins given its strong pricing power in compressed natural gas (CNG) and domestic PNG business (86% of overall gas sales volumes of 3 mmscmd in FY2020). Notwithstanding near-term concerns of a fall in...

The government's priority allocation of domestic gas to CGD sector has enabled MGL to access cheaper gas for CNG, domestic business segments (~85% of sales mix). MGL's strong gas pipeline infrastructure and expanding operations in Mumbai, its adjoining areas and Raigad district will enable it to capture the benefits of the large and growing market given the low penetration. However, sales volume currently is at 42% of pre-Covid level. Given Mumbai is one of the more affected cities by spread of Covid19, we believe recovery in demand (mainly commercial PNG, CNG) will take time and sales growth will be seen only from Q3FY21E. The stock price has...

Volume de-growth at 2.8 mmscmd (down 7.4% YoY and 8.8% QoQ), against our estimates of 3 mmsmcd due to volumes of approx. 0.3 mmscmd lost in last 10 days of March'20 due to nationwide lockdown. The CNG segment (down 8.8% YoY and 12% QoQ) due no movement of people and vehicles during the lockdown The PNG segment reported flattish growth YoY and a decline of 3.8% QoQdomestic segment increased which was offset by decline in industrial and commercial volumes....

Mahanagar Gas's (MAHGL) Q4FY20 PAT underperformed at Rs 1.7bn (+25% YoY).

11 June 2020 CNG volumes were down 10% YoY to 1.98mmscmd. PNG-domestic was 7% higher YoY to 0.42mmscmd, while PNG-industrial was down 8% YoY to 0.39mmscmd. This resulted in total PNG volumes declining 1% YoY to 0.8mmscmd. Thus, EBITDA was ~9% lower than est. Reported PAT stood at INR1.7b (-11% est. +25% YoY), with the tax rate at 25.9%. most commercials have not opened yet and many operational consumers are facing challenges.

We tweak our FY21/22 earnings estimate to factor in lower volumes as well as higher margins; (MGL's five year EBIDTA CAGR at ~20% with margins growing at 14% and volumes at 5% CAGR). MGL remains an enviable...

y respectively) failed to prevent negligent drop in revenues (1.1% y-o-y) as the benefits of lower natural gas prices were passed on to customers. The addition of over 31 thousand households during the recently concluded quarter bringing the total to more than 1.24 million household...

Crude prices witnessed a sharp decline in March due to spread of Covid-19 across the globe and Opec deal failure. A likely increase in oil output by both Saudi Arabia and Russia from Q1FY21E and lower demand are expected to lead to a sizeable oversupply in the oil market. Subsequent low oil prices are expected to significantly affect ONGC's profitability....