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Centrum Broking
Mahanagar Gas (Add)
Target: ₹965
CMP: ₹920.25
Mahanagar Gas (MGL) recurring EBITDA/PAT of Rs 220 crore/Rs 140 crore (-19/-32.5 per cent y-o-y), ahead of our ₹180 crore/₹120 crore driven by marginally higher volumes, record high gross margins and lower other expenses. Gross margins of ₹17.1/scm (+18 per cent y-o-y), well above our's ₹15.5/scm while opex of ₹5.7/scm (+19 per cent y-o-y, against expected ₹6.7/scm) supported record EBITDA margins of ₹11.6/scm.
Volumes at 191 mmscm (2.1 mmscmd, -31 per cent y-o-y) marginally ahead of estimates of 183 mmscm (2 mmscmd), driven by higher commercial volumes which have likely been driven by better pricing power due to record low spot LNG prices in Q2. H1 EBITDA/PAT of ₹300 crore/₹190 crore have declined 45 per cent/51 per cent y-o-y on the back of 46.5 per cent y-o-y dip in average volumes to 1.6 mmscmd.
Significant q-o-q recovery seen in volumes, but y-o-y growth to take time.
We moderate our volume assumptions marginally given the H1 volume performance and guidance for H2 but at the same time raise our margin estimates sharply by ₹1/scm on an average for both years. However, growth beyond FY23-24 remains at risk, given lack of inorganic growth opportunities and potential saturation in existing areas.
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