Mahanagar Gas - Result Update - ICICI Securities

Mahanagar Gas' (MGL) results for Q4FY20 were in line with our estimates on the profitability front. Topline fell 5.1% YoY to Rs. 752.7, above our estimate of Rs. 696.2 crore due to higher realisations. Volumes were at 2.8 mmscmd, down 7.4% YoY, due to lockdown impact. Gross margins were up Rs. 2.1/scm YoY to Rs. 15.3/scm due to lower gas costs and better pricing power. EBITDA was at Rs. 243.8 crore, up 14% YoY, in line with our estimate of Rs. 244.7 crore. On the profitability front, PAT increased 24.8% YoY to Rs. 166.6 crore, in line with our estimate of Rs. 168.7 crore, aided by lower tax rate.

Valuation & Outlook

The government's priority allocation of domestic gas to CGD sector has enabled MGL to access cheaper gas for CNG, domestic business segments (~85% of sales mix). MGL's strong gas pipeline infrastructure and expanding operations in Mumbai, its adjoining areas and Raigad district will enable it to capture the benefits of the large and growing market given the low penetration. However, sales volume currently is at 42% of pre-Covid level. Given Mumbai is one of the more affected cities by spread of Covid-19, we believe recovery in demand (mainly commercial PNG, CNG) will take time and sales growth will be seen only from Q3FY21E. The stock price has also surged sharply since our last recommendation. We downgrade the stock from BUY to HOLD with a target price of Rs. 1145/share (13x FY22E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MGL_Q4FY20.pdf

Shares of Mahanagar Gas Ltd was last trading in BSE at Rs.1074.8 as compared to the previous close of Rs. 1035.8. The total number of shares traded during the day was 109974 in over 6307 trades.

The stock hit an intraday high of Rs. 1087.15 and intraday low of 1001.6. The net turnover during the day was Rs. 114780103.

Source : Equity Bulls

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