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Mahanagar Gas Ltd. reported results for the quarter ended Sept’21. Following are the highlights of the performance.

Highlights from the Quarter (Q2FY22):

Mahanagar Gas reported net revenue of Rs. 907.6 cr for Q2FY22, up 36% on a QoQ basis and up 65% on a YoY basis, due to the corresponding quarter last year being impacted by the pandemic. The company reported EBITDA of Rs. 324.4 cr, translating to an EBITDA margin of 35.74%, down 1264 Bps on a QoQ basis and 789 Bps on a YoY basis.

This was mainly due to higher gas costs, which increased from 29% of revenues in the previous quarter to 42% of revenues in the current quarter. Other expenses and excise duty also increased this quarter. The company reported net income of Rs. 204.3 cr for Q1FY22, at a net margin of 20.68%

On the volumes front, total volumes for the quarter stood at 287.41 mn SCM. Of which, CNG comprised of ~72%, domestic PNG was at ~14% and commercial PNG at ~14%.

OUTLOOK AND VALUATION

MGL’s performance during the quarter was in line with our estimates. Unlocking in the company’s GA of Mumbai Metropolitan Region and surrounding areas led to a strong recovery in CNG volumes. The higher gas costs led to some margin contraction at the EBITDA level. The company continued with its pipeline expansion efforts as well. We keep our estimates for MGL unchanged and maintain our view on the company. With the recent price correction seen in MGL, we revise our rating to BUY for a target price of Rs. 1,378 which is an upside of ~38% from the current market price of Rs. 999 over an investment horizon of 18-24 months.

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