Retain ‘purchase’ on Mahanagar Gasoline 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 Gasoline (MGL) reported Q2FY21 Ebitda of Rs 2.2 billion (-19.1% y-o-y), considerably forward of ours and consensus forecast resulting from 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 lower opex by 53% y-o-y and didn’t cross 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 based on administration (versus ~105%/93% at Gujarat Gasoline/IGL). We consider considerations on margin dilution resulting from 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 autos 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 might partially retain the advantage of the 25% lower in enter gasoline worth.
Capex steerage for FY21 stays at ~Rs 5 billion, and we count on inner money circulate to be adequate to fund this regardless of modest earnings. New space–Raigad—volumes had been 0.4mmscmd pre-Covid-19 and might add 0.5–0.6mmscmd at peak run fee. They’ve the PNGRB’s approval for an 8.5km pipeline enlargement from Rasayni to Panvel and 5.5km on NH-17 (Goa freeway), which is able to additional spur their volumes.
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