Prabhudas Lilladher's research report on Mahanagar Gas
We lower our estimates for FY23/24E by 3-10% as we lower our margin assumption to Rs11/scm (earlier Rs12.8-13) and increase our volumes by ~8%. Q2 results were hit, as MGL had to meet 5% CNG/PNG domestic demand through LNG (prices were at USD14.5/mmbtu) to make up for reduced domestic gas supplies; incremental hit of Rs400m. Q2 blended gas cost/scm was at Rs13.3 (+52%Q/Q) which led to drop in gross margins at Rs18.3/scm (- 16%Q/Q). Currently, domestic gas supplies for CNG/PNG (domestic) are based on 110% of last six-month usage which will improve by mid-November as per management.
MGL remains a play on increased gas usage from rising vehicle and PNG penetration and we like the business, given its dominating share in growing markets of Mumbai and suburbs. Reiterate ‘BUY’ with a TP of Rs1,345 (Rs1,370 earlier).
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