Retain ‘purchase’ on Mahanagar Fuel with TP of Rs 1,241

Amongst CGDs, MGL’s volumes took the harshest knock as Mumbai is among the many worst-hit by Covid-19. (Picture: Reuters)

Mahanagar Gas (MGL) reported Q2FY21 Ebitda of Rs 2.2 billion (-19.1% y-o-y), considerably forward of ours and consensus forecast as a result of an all-time excessive gross margin of Rs 17.28/scm, up 17.7% y-o-y. MGL additionally reported an all time excessive Ebitda margin, which surged 17% y-o-y as the corporate reduce opex by 53% y-o-y and didn’t go on the declining enter costs. After falling by 31% y-o-y throughout 2QFY21, volumes in October and November so far have recovered to ~100% of pre-Covid-19 in keeping with administration (versus ~105%/93% at Gujarat Gas/IGL). We consider issues on margin dilution as a result of open entry are overblown. Retain ‘purchase’ with a revised TP of RS 1,241.

Amongst CGDs, MGL’s volumes took the harshest knock as Mumbai is among the many worst-hit by Covid-19. Volumes fell 31% y-o-y throughout 2QFY21 (versus IGL 12%, GGL+6%).Although CNG volumes fell to 1.3mmscmd (down 42% y-o-y), home PNG surged to 0.5mmscmd (up21.6% y-o-y).

Administration indicated that volumes will stay modest in FY21 till CNG automobiles are again to pre-Covid-19 in Pune and Mumbai. They additional added CNG volumes have recovered to 90–95%, Industrial to ~100%, and home to ~130% whereas nonetheless lagging in business. Gross and Ebitda margin each scaled all-time highs in Q2FY21, and would stay elevated owing to imminent winter seasonal demand as we consider MGL could partially retain the advantage of the 25% reduce in enter fuel value.

Capex steerage for FY21 stays at ~Rs 5 billion, and we count on inside money circulation to be ample to fund this regardless of modest earnings. New space–Raigad—volumes have been 0.4mmscmd pre-Covid-19 and may add 0.5–0.6mmscmd at peak run price. They’ve the PNGRB’s approval for an 8.5km pipeline growth from Rasayni to Panvel and 5.5km on NH-17 (Goa freeway), which can additional spur their volumes.

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