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ICICI Securities Report
Mahanagar Gas Ltd.’s Q1 FY21 earning per share (EPS) was down 73% YoY hit by plunge in volumes (due to the lockdown) and Ebitda margin.
Volume decline, especially in case of compressed natural gas , was steeper than estimated and Ebitda margin was down 23% YoY versus just 2% YoY estimated decline.
To factor in the disappointment in Q1, we have cut FY21-FY22E volume estimates by 7-2% and FY21E Ebitda margin by 2%. This has led to a cut in FY21-FY22E EPS by 10-2% and target price by 5% to Rs 882 (9% downside).
We now estimate 1) 36% YoY decline in FY21E EPS hit by 26% YoY decline in volumes to 794 million metric standard cubic meter and 9% YoY decline in Ebitda margin to Rs 8.8/standard cubic meter and
2) 52% YoY rise in FY22E EPS driven by 36% YoY rise in volumes to 1.08 billion cubic metre and 7% YoY rise in Ebitda margin to Rs 9.5/standard cubic meter.
Gradual fall in Ebitda margin is assumed thereafter. Fall in Ebitda margin may be earlier and steeper and volumes lower than estimated if competition is allowed, and hurts Mahanagar Gas.
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