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Target: ₹1,103
CMP: ₹881.95
We leave our FY23/24E estimates unchanged. Mahanagar Gas Q3 results came higher, due to higher-than-expected margins at ₹8.2/scm vs ₹6.7/scm.
Mahanagar Gas will benefit from lower gas prices in the near term given implementation of Kirit Parekh committee report, which has suggested price cap of $6.5/mmbtu ($8.5 currently) for domestic gas used for priority sectors like CGD and fertiliser and drop in spot LNG prices to $20/mmbtu from Q3 average of over $30. (Spot LNG accounts for about 10 per cent of Mahanagar Gas’ gas requirement).
Mahanagar Gas remains a play on increased gas usage from rising vehicles and PNG penetration. We like the business because of its dominating share in growing markets of Mumbai and its suburbs. Reiterate ‘BUY’ with a target price of ₹1,103 (unchanged).
We believe economic factors such as introduction of new CNG buses by state government, and new three wheelers along with geographical expansion to Raigad and Karjat will support volumes. Also, government’s push towards PNG’s domestic connections will add volume traction.
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