Dec 01, 2016 11:37 AM IST | Source:

Buy Mahanagar Gas; target of Rs 914: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Mahanagar Gas has recommended buy rating on the stock with a target price of Rs 914 in its research report dated November 28, 2016.

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Prabhudas Lilladher's research report on Mahanagar Gas

Mahanagar Gas' (MGL's) reported Q2FY17 EBITDA and PAT at Rs 1.62bn (+35%YoY, 6%QoQ) and Rs 1.02bn (41%YoY, 10%QoQ), respectively, were in line with our estimates. MGL’s Q2 gas sales momentum has come off sequentially; however, demand momentum is likely to pick up on the back of increased conversion of private vehicles and taxis. Also, government push for PNG domestic connections will support volumes; Overall sales volume in Q2 was up 4.8% YoY and H1FY17 up 6.1%YoY against FY16 at 1.7%. Supported by cut in domestic gas prices, EBITDA/scm was at Rs 6.75 (FY16 at Rs 5.78/scm and Q1 at Rs 6.7/scm). Tailwinds of cheaper domestic gas, along with favourable demand traction from new geography, will drive earnings.

We maintain our earnings for FY17/18E and expect 16.2% CAGR earnings growth over FY16‐18E. Maintain "BUY" with a three year DCF‐based PT of Rs 914 (Rs 654 earlier); we also cut the WACC to 9.7% (11% earlier) to factor in lower yields.

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