Q1 Results Review: Gujarat Gas Outperforms Peers Indraprastha Gas, Mahanagar Gas
But the nation’s largest city gas distributor is not the analysts’ favourite.
India’s largest city gas distributor outperformed peers in the three months ended June as it reported its highest quarterly profit, aided by rising volume and lower raw material costs.
Gujarat Gas Ltd.’s volume rose 42 percent year-on-year on higher demand from ceramic tilemakers in Gujarat. Morbi—India’s biggest ceramic manufacturing hub—switched to liquified natural gas after the National Green Tribunal ordered a shutdown of all units that run on coal gasifiers.
Volume of Delhi-based Indraprastha Gas Ltd. grew at its slowest pace in five quarters while that of Mumbai’s Mahanagar Gas Ltd. fell to its lowest in eight quarters. While a better performance across all segments helped Indraprastha Gas to post a double-digit growth in volumes for the tenth straight quarter, a fall in offtake by state transport units weighed on Mahanagar Gas.
“The volumes are stable across all sectors — CNG domestic and industrial, commercial. We’ve been maintaining and that we’ll grow at more than 12 percent for the whole year,” ES Ranganathan, managing director at Indraprastha Gas, told BloombergQuint.
Still, Mahanagar Gas remained the most profitable supplier of piped gas. Its operating profit—or earnings before interest, tax, depreciation and amortisation—per unit rose to a record high of Rs 10.3 per standard cubic metre as operating expenses and raw material costs fell.
Growth of Indraprastha Gas’ per unit Ebitda was the slowest among peers at 8.3 percent, while it was the highest for Gujarat Gas at 33 percent.
Analysts’ View
Analysts expect better growth prospects for all city gas distributors as the nation aims to increase the share of natural gas in the primary energy basket to curb reliance on fossil fuel. But they prefer Mahanagar Gas over peers because of its cheaper valuation, higher free cash flow generation, better pricing power and decent payouts. Nearly 89 percent of the 26 analysts covering the stock recommend a ‘Buy’ and it has no ‘Sell’ rating.
That’s despite Mahanagar Gas being the only listed city gas distributor stock to decline in past 12 months. The fall in its shares was mainly led by potential stake sale by promoter Royal Dutch Shell Plc, slower volume growth and weaker margin.