Sharekhan has given Buy recommendation for Mahanagar Gas with a target price of Rs. 1450 in its research report issued on May 25, 2021
Sharekhan’s research report on Mahanagar Gas
Q4FY2021 operating profit at Rs. 316 crore; up 29.7% y-o-y and 4.8% below/inline versus ours/street estimates. Numbers lagged our estimates due to lower-than-expected EBITDA margin of Rs. 12.1/scm (down 3.7% q-o-q) and a slightly lower volume at 2.9 mmscmd (up 3.8% y-o-y). CNG/domestic PNG volume stood at 102%/109% of pre-COVID-19 level at 2 mmscmd/0.46 mmscmd; Industrial/commercial (I/C) PNG volume at 106% y-o-y. Gross margin remained flat q-o-q at Rs. 17.7/scm. Q1FY2022 volumes to get impacted as CNG volume declined by 25-30% versus normal levels due to lockdown; expect a fast recovery as the lockdown eases and vaccination drive gains pace. Ramp-up of the Raigad GA and decent growth in existing GAs would drive long term volume growth. MGL’s is the cheapest CGD stock with an attractive valuation of 12.2x FY23E EPS.
Hence, we retain a Buy on MGL with an unchanged PT of Rs. 1,450. OMCs’ demand of high dealer commissions would remain a near-term overhang.