Mahanagar Gas Q2 Results Review - Volumes Stay Resilient, Margins Likely To Improve: ICICI Securities

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ICICI Securities Report

Mahanagar Gas Ltd. reported its Q2 FY23 Ebitda at Rs 2.53 billion (down 16% YoY, 11.5% QoQ) versus our estimate of Rs 3.1 billion. Adjusted profit after tax dipped 19.7% YoY (down 11.5% QoQ) to Rs 1.64 billion (our estimate: Rs 2 billion).

The miss was due to weaker than estimated margins even as volumes were broadly in-line. Management has attributed the dip to continued pressures of higher spot liquefied natural gas costs and higher opex.

Mahanagar Gas' gross margin/standard cubic metre and Ebitda/scm were down 16% and 24% YoY, owing to sharply higher gas costs, even as net realisations grew by a strong 70.6% YoY.

Aggressive price increases taken post Q2 FY23 and a softening of crude and spot LNG prices should help alleviate margins, while volumes remain resilient (so far) to higher end-user prices.

This should help sustain margins at Rs 13.8/scm (gross) and Rs 8.6/scm (Ebitda) for FY23E-FY24E, despite the spectre of rising LNG and pooled gas costs.

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