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Retain ‘buy’ on Mahanagar Gas with TP of Rs 1,241

Retain ‘buy’ on Mahanagar Gas with TP of Rs 1,241
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Retain ‘buy’ on Mahanagar Gas with TP of Rs 1,241

Retain ‘purchase’ on Mahanagar Gasoline with TP of Rs 1,241

Mahanagar Gas ReutersAmongst 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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