- MGL's Q1FY18 result beats our and market expectations. PAT has increased 34% yoy and 25% sequentially to Rs.1.24 bn (vs. our expectation of Rs.1.12 bn). Higher PAT is mainly on account of favorable exchange rate, lower raw material cost (fall in spot RLNG prices), better alternate fuel linked price realization in case of industry/commercial segment and lower operating cost. Gross margin has increased 13% qoq to Rs.2.99 bn (+26% yoy) benefiting from higher realization due to better sales mix. Another important factor to monitor is EBIDTA per unit of sales. The same has increased 26% qoq to Rs.8.7/scm.
- We expect MGL to book CNG gas volume of ~1.92 mmscmd and PNG volume of 0.83 mmscmd in FY18E. Similarly, we model CNG gas volume of ~2.0 mmscmd and PNG volume of 0.84 mmscmd in FY19E. We expect an EPS of Rs.49.3 (earlier Rs. 42.5) reflecting strong Q1FY18 performance & cash EPS of Rs.62.3 for FY18E and an EPS of Rs.51.7 (earlier Rs. 45.8) & cash EPS of Rs.66.7 for FY19E. Based on our estimates, the stock at current market price of Rs.1036 is trading at 10.5x EV/EBIDTA and 20x P/E on FY19E earnings. We maintain SELL recommendation on MGL with a DCF based revised price target of Rs.1006.