Company Update : Mahanagar Gas Ltd By Motilal Oswal Financial Services Ltd
Adj. EBITDA margin disappoints estimates
* MAHGL’s adj. EBITDA margin stood below our est. at INR8.35/scm (our est. INR10/scm, reported EBITDA: INR10/scm). CNG volumes came in marginally below our est. at 2.9mmscmd (our est. 3mmscmd). While MAHGL’s realization increased sharply ~INR3/scm QoQ, primarily on account of an INR633.5m provision reversal, gas cost/opex increased 0.3/1 per scm QoQ, leading to ~INR1.7/scm QoQ increase in EBITDA/scm margin. However, EBITDA margin, adjusted for provision reversal amounting to INR633.5m, stood at INR8.35/scm (our est. INR10/scm).
* We note that Spot LNG prices were elevated, averaging USD14/mmbtu in 4Q (similar QoQ). However, Spot LNG prices have corrected in 1QFY26’TD, with current prices at ~USD11.3/mmbtu. On 8th Apr’25, MAHGL had taken CNG price hikes of ~INR1.5 per kg and D-PNG price hike of INR1/scm.
* In a recent press release, MAHGL stated that, as communicated by GAIL, its domestic gas allocations have been reduced by ~18%, effective from 16th Apr’25. This adjustment decreases its share of domestic gas in the CNG segment from 51% to 41%. However, the recent APM reduction has been compensated by 20% costlier New Well Gas.
* MAHGL currently trades at 12.5x FY26E SA P/E, while its one-year forward LTA is 13.6x P/E. We have a Buy rating on the stock.
4Q financial performance
* Total volumes were in line with our estimate at 4.2mmscmd (+11% YoY).
* Both CNG and D-PNG volumes came in line with estimates. I/C PNG volumes stood 12% above est.
* EBITDA/scm came in above our est. at INR10. However, adjusted EBITDA/scm came in at INR8.35 (our est. INR10).
* Realization increased ~INR3/scm QoQ, while gas cost/opex increased 0.3/1 per scm QoQ. Other expenses stood above est. at INR428m.
* The increase in realization (~INR1.7scm) was on account of the reversal of provision amounting to INR633.5m, based on negotiations with OMCs w.r.t trade margins.
* Resulting EBITDA stood in line with our est. at INR3.8b (-4% YoY).
* MAHGL’s PAT also came in line with our est. at INR2.5b (-5% YoY).
* Depreciation and interest cost stood above est., while other income came in below est.
* In FY25, MAHGL’s net sales grew 11% to INR69b, while EBITDA/PAT declined 18%/19% YoY to 15.1b/10.5b.
* The Board has recommended a final dividend of INR18/sh (FV: INR10/sh; dividend for the entire year: INR30/sh).
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