Q4FY22 Results Update
The brokerage said in its latest research report that “Mahanagar Gas (MGL) reported higher-than-expected results with Q4 EBITDA and PAT at Rs2.1bn (+109% QoQ; PLe Rs1.2bn) and Rs1.3bn ( +132% QoQ) ; PLe: Rs733mn) In FY22 EBIDTA/PAT was Rs9.2bn (-1% YoY) and Rs5.9bn (-4% YoY) Higher Q4 combined realization of Rs41.6/scm (+12.7% QoQ) supported gross margins of Rs 16.8/scm vs. Rs 11.8 in Q3 FY22 as gas cost was Rs 24.8/scm (-2% QoQ ) due to low LNG usage .3 in Q3) and EBIDTA spreads were higher at Rs7.6/scm (Q3FY22:Rs3.4/scm; PLe Rs4.0/scm). scm was Rs8.4 vs Rs11.6 in FY21 as the sharp rise in gas prices hit profitability.”
According to the brokerage, “Q4 GNC and PNG volumes were 205 mscm (-7% qoq) and 80.3 mscm (-4% qoq). However, easing pandemic concerns, rising of vaccination coverage and school openings will further support volumes We have cut our FY23/24E volume growth by ~6% each to 3.5/3.7 mmscmd (3.7/3.9 before ), as we see moderate growth in a high gas cost environment.”
Buy for a target price of Rs 1,103
The brokerage has stated that “MGL has secured gas supplies of 0.25 mmscmd for a medium-term contract to outperform high spot LNG prices. Additionally, the reduction in spot LNG prices to ~$20/mmbtu from #35/mmbtu will alleviate short-term cost pressure Our FY23/24E margin factor at Rs8.8/9.5/scm We believe that economic factors such as 1) the introduction of new CNG buses by the state government, 2 ) new three-wheelers coupled with geographical expansion to Raigad and Karjat will support volumes, government push towards PNG domestic connections will add volume traction.”
“We lowered our FY23/24E estimates by 22%/16% to take into account lower volumes (-6% each) and lower margins (Rs8.8/Rs9.5 vs. previous Rs10.2) Fourth quarter results were brought forward due to higher-than-expected margins supported by reduced spot LNG buying and lower volumes. MGL continues to bet on increased gas usage due to increased vehicles and PNG penetration. We like the business because of its dominant share in the growing markets of Mumbai and its suburbs. Reiterate ‘BUY’ with a TP of Rs 1,103 (Rs 1,187 before),” said Prabhudas Lilladher.
The stock has been selected from the Prabhudas Lilladher brokerage report. Greynium Information Technologies, the author and the brokerage house are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult certified experts before making any investment decisions.