Prabhudas Lilladher's research report on Mahanagar Gas
We increase our FY24/25E estimates by 14.2%/12.6% to factor in higher margins, given benign gas price outlook. Mahanagar Gas (MAHGL) Q4 results came high, due to higher than expected margins at Rs12.8/scm vs Rs10.2/scm. We believe MAHGL will benefit from lower gas prices in the near term given 1) implementation of Mr Kirit Parekh committee report with suggested price cap of USD6.5/mmbtu towards domestic gas used for priority sectors like CGD and fertilizer and 2) Higher allocation of HPHT (0.19mmscmd) which replaced imported spot LNG. MAHGL remains a play on increased gas usage from rising vehicles and PNG penetration.
Outlook
We like the business because of its dominating share in growing markets of Mumbai and its suburbs. Reiterate ‘BUY’ with a TP of Rs1,260 (Rs 1,103).
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