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Our view

MAHGL’s 4QFY23 reported operating profit at Rs 3.9bn (+81% YoY; +52% QoQ), stood in-line with our estimates (YES Sec: Rs 3.8bn) but above street estimates (Rs 3.0bn). The earnings growth in the quarter was led by strong margins, in-turn driven by moderation in in-put gas cost. The LNG prices experienced a sharp decline during the quarter from average of USD 33/mmbtu to USD 18/mmbtu, which helped reduced RM cost during the quarter. While FY23 was challenging due to high gas price environment, going ahead with the moderation in LNG prices, implementation of new domestic gas pricing policy and the policy for preferential allocation of HPHT gas to CGD-Priority segment, the prognosis appears better. Having said that, we believe that per unit margins continue to be a stronger driver of earnings and value for MAHGL, as the scope for strong growth in volumes is rather limited, at least in the near to mid-term.

Result Highlights

* Profitability: Reported EBITDA and PAT stood at Rs 3.9bn (+81% YoY; +52% QoQ) and Rs 2.7bn (+104% YoY; +56% QoQ). Profitability improved YoY and QoQ on price increase in retail CNG and PNG undertaken in previous quarter, along with reduction in input LNG cost in the 4QFY23. The FY23 Ebitda stood at Rs 11.8bn (+28% YoY) and PAT stood at Rs 7.9bn (+32% YoY) ; Primarily on 14% YoY higher sales volume along with 12% YoY higher Ebitda/unit at Rs 9.5/scm

* Gross Margin: The gross margin for the quarter stood at Rs 18.7/scm (+41% YoY; +36% QoQ); the same for FY23 stood at Rs 14.9/scm (+8% YoY). ? EBITDA per unit: The EBITDA per unit stood in-line at Rs 12.8 (vs Rs 8.2/scm in 3Q) sequentially higher, as price increase in CNG & PNG along with correction in LNG prices helped improve profitability.

* Gas Sales: The total gas sales during the quarter stood at 3.37mmscmd (+6.4% YoY; -1.2% QoQ), with CNG sales at 2.41mmscmd (+5.8% YoY; -2.6% QoQ) and PNG at 0.96mmscmd (+7.8% YoY; +2.6% QoQ). For FY23 the same stood at as follows CNG at 2.49mmscmd (+18% YoY) and PNG at 0.93mmscmd (+5.2% QoQ) and total gas sales at 3.42mmscmd (+14% YoY).

* Infrastructure development: During the quarter, MAHGL added a) 12 CNG stations in GA-I&II, taking the total to 313, b) 128km of pipeline in GA-I&II taking total to 6535km & 10km in GA-III taking total to 382km.

Valuation

We revise our rating to NEUTRAL with a Mar’24 TP of Rs 1020, as we model for an earnings growth at 4% CAGR (FY23-30e). Our DCF based TP implies a target multiple of 11.9x FY24e, vs 12.5x stock is currently trading.

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