ICICI Securities research report on Mahanagar Gas
Mahanagar Gas (MGL)’s Q2FY24 EBITDA/PAT at INR 4.8/3.4bn missed our estimates of INR 5bn/3.5bn, but the company delivered a second successive quarter of strong YoY growth with EBITDA/PAT up 89/106% YoY. Volume growth of just 3.4% was muted, but INR 6.6/scm jump YoY in EBITDA/scm was enough to drive the earnings strength in the quarter. Margins have jumped due to a combination of lower gas costs (down INR 8.7/scm YoY) and a relatively lower dip in realisations (down INR 1.4/scm YoY). We see further improvement in volume and margin in FY24E with the acquisition of Unison comprising 3GAs (Ratnagiri, Chitradurga & Devangere, and Latur & Osmanabad districts), new pricing policy and a moderate gas price environment. FY24/25E EPS estimates see a second successive upgrade post-Q1 upgrades (albeit smaller), due to stronger margin assumptions. Reiterate BUY.
Outlook
TP raised marginally to INR 1,350 (from INR 1345), with higher earnings growth offset by a lower terminal growth rate assumption to factor in the imminent EV threat. Reiterate BUY.
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