ICICI Direct recommended hold rating on Mahanagar Gas with a target price of Rs 1080 in its research report dated November 13, 2019.
ICICI Direct's research report on Mahanagar Gas
Mahanagar Gas (MGL) reported a mixed set of Q2FY20 numbers. While volumes for the company were below our estimates, operational profit was above estimates on account of better-than-expected gross margins. The topline increased 12.9% YoY to Rs 861.6 crore, marginally above our estimate of Rs 851.4 crore. Volumes came in at 3.0 mmscmd (up 1.3% YoY) vs. our estimate of Rs 3.1 mmscmd mainly on account of lower growth of 1% YoY in CNG volumes. Gross margins increased by Rs 2.2/scm YoY to Rs 14.7/scm (our estimates: Rs 13.8/scm) due to higher-than-expected realisation. On the profitability front, PAT increased 98.5% YoY to Rs 270.6 crore and came in above our estimate of Rs 175.5 crore on account of tax reversal of Rs 14.8 crore after implementation of lower tax rate.
Due to the recent run-up in stock prices and also on uncertainty over the regulator’s (PNGRB) decision on possible competition in existing area (Mumbai), we arrive at a target price of Rs 1080 with a HOLD recommendation.
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