Moneycontrol
Dec 01, 2016 11:37 AM IST IST | Source: Moneycontrol.com

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.



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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