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Analyst Corner: Maintain ‘buy’ on Mahanagar Gas; volumes in line with estimates

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MGLEbitda was in line at Rs 3.2b (+30% YoY). PAT got here in at Rs 2.1b (+28% YoY), with the tax charge at 25.8%.

4QFY21 – in step with our estimates: Volumes have been in step with our estimate at 2.9mmscmd (up 4% YoY/QoQ). Ebitda/scm stood at Rs 12.1 (v/s Rs 12.4 in 3QFY21; +26% YoY). The gross margin remained flat QoQ at Rs 17.7/scm (+16% YoY), whereas opex reasonably elevated QoQ to Rs 4.9/scm (v/s Rs 4.5 in 3QFY21; flat YoY). CNG volumes stood at 2mmscmd (+2% YoY; +7% QoQ). PNG volumes got here in at 0.9mmscmd (+8% YoY; -2% QoQ). PNG home volumes fell 10% QoQ to 0.46mmscmd – as demand for family cooking declined with the opening up of places of work.

Ebitda was in line at Rs 3.2b (+30% YoY). PAT got here in at Rs 2.1b (+28% YoY), with the tax charge at 25.8%. FY21 – margins increase; volumes drive influence: Ebitda stood at Rs 9.3b (-11% YoY) regardless of Ebitda/scm increasing to Rs 11.6 (v/s Rs 9.7 in FY20). Volumes, down 25% YoY to 2.2mmscmd, led the influence. CNG volumes fell 34% YoY to 1.4mmscmd. PNG volumes have been flat YoY at 0.8mmscmd (PNG home volumes aided 15% development, whereas decline was seen in PNG Business/Industrial). PBT/PAT stood at Rs 8.3b/Rs 6.2b (-15% YoY/-22% YoY). The corporate introduced closing dividend of Rs 14/share (along with interim dividend of Rs 9/share), totaling Rs 23/share in FY21.

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Valuation and examine – preserve Purchase: The corporate has been guiding for long-term quantity development of 5–6% per 12 months. Progress would primarily be pushed by the event of the Raigad GA, which has complete quantity potential of ~0.5mmscmd over the following 3–4 years. PNG-commercial penetration in MAHGL’s GAs is simply ~20%; because it already has the pipeline infrastructure in place and solely last-mile connectivity is required, this presents upside potential in volumes. That stated, MAHGL highlighted that the additions of CNG stations in Mumbai (GA1) and Thane City (GA2) are proving to be a problem because of the shortage of obtainable land.

The inventory trades at 14x FY23E EPS of Rs 81, with dividend yield of ~3% for FY22/FY23E. We preserve Purchase contemplating the corporate’s enticing valuations.

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