Sharekhan is bullish on Mahanagar Gas recommended buy rating on the stock with a target price of Rs 1380 in its research report dated November 17, 2020.
Sharekhan’s research repor on Mahanagar Gas
MGL reported much lower-than-expected decline of 32.6% y-o-y in its PAT to Rs. 144 crore (versus our estimate of Rs. 121 crore) in Q2FY2021 due to higher-than-expected EBITDA margin at Rs. 11.6/scm (up 17% y-o-y) and marginal beat in volume at 2.1 mmscmd (up 86.3% q-o-q). CNG volume stood at 58% of pre-COVID-19 level at 1.3mmscmd in Q2FY2021, while domestic PNG volume grew by 21.6% y-o-y to 0.46mmscmd and industrial/commercial PNG volume declined by 20% y-o-y to 0.33 mmscmd. MGL’s earnings are likely to recover sharply in H2FY2021 as overall volumes have recovered to pre-COVID-19 level of 3mmscmd in November with CNG volumes at 90%-95% of pre-COVID-19 level.
Overall, we expect a 23% PAT CAGR over FY2021E-FY2023E. MGL’s stock price has underperformed the Sensex by 25% in the past one year, and we believe post clarity on open access, the stock is likely to gain momentum as earnings recovery is on track. We retain Buy on MGL with an unchanged PT of Rs. 1,380.