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MOSL: MAHARASHTRA NATURAL GAS-Speeding in top gear-Volume CAGR of ~25% in FY13-18

Maharashtra Natural Gas: Speeding in top gear; Volume CAGR of ~25% in FY13-18

 

We met the management of Maharashtra Natural Gas Limited (MNGL). Key takeaways:

Developments in MNGL’s hometown — Pune

• MNGL’s current gas portfolio consists 65% CNG, 30% PNG-Industrial/Commercial and 5% PNG-Residential.
• The company has recently engaged Bharat Forge (its current biggest customer) for the supply of PNG-Industrial.
• MNGL has commissioned ~20 CNG stations in FY19 (2x of FY18), totaling 72 CNG filling stations in Pune.
• The company has added ~65,000 PNG-Residential connections in FY19 (higher than ~52,000 additions in FY18).
• Till date, ~1,200kms of MDPE and ~200kms of steel pipeline has been laid, with plans to lay additional ~500kms of MDPE and ~300kms of steel pipeline over the next five years.
• The company expects Pune sales volume at ~0.8mmscmd in FY19 (up from ~0.6mmscmd in FY18), and ~1.0mmscmd in another 1-2 years. 

Current Challenges

• Furnace oil price is ~15% cheaper than gas, creating a big competitive disadvantage for PNG-Industrial.
• Due to road infrastructure constraints and a long monsoon season (5-6 months in a year), penetration of PNG pipelines into a core city is a major challenge.
• The company’s highest EBIDTA/scm among peers is difficult to sustain. This could further normalize with increase in PNG-Industrial/Commercial sales volume.