Motilal Oswal - Mahanagar Gas (MGL) MOSL: MAHANAGAR GAS (Buy)-Volume growth impressive; EBITDA/scm outperformance driven by Fx

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Motilal Oswal

Swarnendu Bhushan

EUR 120.00 For Business Accounts Only

MOSL: MAHANAGAR GAS (Buy)-Volume growth impressive; EBITDA/scm outperformance driven by Fx

Mahanagar Gas: Volume growth impressive; EBITDA/scm outperformance driven by Fx

(mahgl IN, Mkt Cap USD1.3b, CMP INR920, TP INR1300, 41% Upside, Buy)

Against our expectation of +6% volume growth, MAHGL’s total volume growth came in at +8% YoY for 3QFY19. INR appreciation helped the company to increase its EBITDA/scm from INR8.1 in 2QFY19 to INR8.8 in the quarter. Led by higher volumes and margins, EBITDA came in at INR2.4b (est. INR2.2b, +19% YoY, +8% QoQ), while PAT came in at INR1.5b (est. INR1.3b, +20% YoY, +9% QoQ).
CNG segment grew at 8% YoY while total PNG growth stood at 7%. Within PNG, domestic volume grew at 13% YoY, 6% QoQ. MAHGL’s total sales volume stood at 2.96mmscmd, a growth of 8% YoY, flat sequentially.
EBITDA/scm: After EBITDA/scm of INR8.1 in 1HFY19, the same grew to INR8.8 in the quarter. The last price hike taken reflected a much higher INR and appreciation in the same resulted in margin expansion.

Valuation and view

MAHGL’s performance has been encouraging in terms of volume growth. However, its EBITDA/scm is the highest among listed players and looks unsustainable in the long term. We increase our EBITDA/scm assumption to INR8.5 for FY19, but retain our earlier assumption of INR7.9 for FY20 and INR7.8 for FY21.

30/01/2019 8 EN

Underlying

Mahanagar Gas

Mahanagar Gas Limited is a city gas distribution company. The Company is engaged in the distribution of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai and its adjoining areas and in the Raigad district in the state of Maharashtra, India. It also supplies CNG for vehicles, including rickshaws, taxis and cars in Mumbai, Thane, Mira-Bhayander, Navi Mumbai. It supplies CNG to Brihanmumbai Electricity Supply and Transport/Thane Municipal Transport/Maharashtra State Road Transport Corporation/Navi Mumbai Municipal Transport (BEST/TMT/MSRTC/NMMT) buses, light commercial vehicles (LCVs)/ tempos/ trucks/private buses. It offers PNG for domestic, commercial and industrial purpose. It offers PNG for various industries, including metal, pharmaceuticals, food and beverages, printing and dyeing, oil mills, power generation and air conditioning. It also installs gas geysers. Its commercial PNG has various applications in hospitals, hotels, power, charitable trusts and industries.

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INE002S01010 National Stock Exchange of India India

Provider

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Swarnendu Bhushan

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MOSL: MAHANAGAR GAS (Buy)-Volume growth impressive; EBITDA/scm outperformance driven by Fx

MOSL : MAHANAGAR GAS: Margin pressures persist; volumes at a record high

MOSL: MAHANAGAR GAS (Buy)-Volume growth remains strong; margin concerns remain unanswered

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MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

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MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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