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Retain ‘buy’ on Mahanagar Gas with TP of Rs 1,241

Among CGDs, MGL’s volumes took the harshest knock as Mumbai is among the many worst-hit by Covid-19. (Image: Reuters)

Mahanagar Gas (MGL) reported Q2FY21 Ebitda of Rs 2.2 billion (-19.1% y-o-y), considerably forward of ours and consensus forecast because of an all-time excessive gross margin of Rs 17.28/scm, up 17.7% y-o-y. MGL additionally reported an all time excessive Ebitda margin, which surged 17% y-o-y as the corporate reduce opex by 53% y-o-y and didn’t cross on the declining enter costs. After falling by 31% y-o-y throughout 2QFY21, volumes in October and November to this point have recovered to ~100% of pre-Covid-19 in accordance with administration (versus ~105%/93% at Gujarat Gas/IGL). We consider issues on margin dilution because of open entry are overblown. Retain ‘buy’ with a revised TP of RS 1,241.

Among CGDs, MGL’s volumes took the harshest knock as Mumbai is among the many worst-hit by Covid-19. Volumes fell 31% y-o-y throughout 2QFY21 (versus IGL 12%, GGL+6%).Though CNG volumes fell to 1.3mmscmd (down 42% y-o-y), home PNG surged to 0.5mmscmd (up21.6% y-o-y).



Management indicated that volumes will stay modest in FY21 till CNG automobiles are again to pre-Covid-19 in Pune and Mumbai. They additional added CNG volumes have recovered to 90–95%, Industrial to ~100%, and home to ~130% whereas nonetheless lagging in industrial. Gross and Ebitda margin each scaled all-time highs in Q2FY21, and would stay elevated owing to imminent winter seasonal demand as we consider MGL could partially retain the profit of the 25% reduce in enter gasoline value.

Capex steering for FY21 stays at ~Rs 5 billion, and we count on inside money stream to be enough to fund this regardless of modest earnings. New space–Raigad—volumes have been 0.4mmscmd pre-Covid-19 and might add 0.5–0.6mmscmd at peak run rate. They have the PNGRB’s approval for an 8.5km pipeline growth from Rasayni to Panvel and 5.5km on NH-17 (Goa freeway), which is able to additional spur their volumes.

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