Mahanagar Gas' June-quarter earnings impressed brokerages despite supply disruptions linked to the West Asia conflict, with both Morgan Stanley and Citi highlighting stronger-than-expected volume growth and resilient margins.
The brokerages believe favourable CNG economics, supported by price hikes and lower gas sourcing costs, continue to underpin the company's earnings outlook.
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Brokerages Decode
Morgan Stanley
- Maintained Overweight with a target price of Rs 1,421.
- Said the company delivered a growth surprise, beating expectations.
- Attributed the earnings beat to strong volume growth, CNG retail price hikes and exposure to lower-cost US gas sourcing.
- Said unit margins were supported by lower Henry Hub gas prices and the Rs 5/kg CNG price increase.
- Expects oil marketing companies' under-recoveries to keep alternative fuel prices elevated for longer, which should continue to benefit CNG demand.
Citi
- Maintained Buy with a target price of Rs 1,400.
- Said the company's performance was impressive despite supply challenges arising from the West Asia conflict.
- Noted that volumes exceeded expectations, led by robust CNG demand.
- Said MGL successfully offset supply-related pressures through calibrated price hikes across segments.
MGL's Q1 Performance
Mahanagar Gas reported a 48.5% sequential jump in net profit to Rs 193 crore for the June quarter, while revenue increased 15.6% to Rs 2,373 crore.
Operating performance also strengthened, with EBITDA rising 31.9% quarter-on-quarter to Rs 343 crore, while EBITDA margin expanded to 14.5% from 12.7% in the March quarter.
The strong operational performance, coupled with resilient CNG volumes and improved margins, reinforced brokerages' view that MGL remains well placed to benefit from favourable gas sourcing economics and sustained demand for cleaner transportation fuels, even as geopolitical disruptions continue to weigh on global energy markets.
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