Wednesday, 11 April 2018

Mahanagar Gas stock slips after block deal

Mahanagar Gas stock slipped 3% after block deal, while nearly 7.6% of equity was traded in block deals on the NSE.

The stock is currently trading at Rs917.15, down by Rs27.4 or 2.9% from its previous closing of Rs944.55 on the BSE. The scrip opened at Rs911 and has touched a high and low of Rs921.20 and Rs908.90 respectively.

We expect the CNG & PNG segment of Maganagar Gas (MGL) to report volume CAGR of 6.4% and 3.5% over FY18-20E. We estimate MGL to report revenue CAGR of 8% over FY18-20E. Further, PAT CAGR of 6% over FY18-20E is estimated on the back of margin contraction of 210bps to 31.5% over FY18-20E. We forecast the margin to be under pressure on account of expansion of industrial network. We estimate the return on equity to contract 205bps to 23.8% over FY18-20E, on the back of declining margins. The stock is currently trading at ~17x FY20E EPS.

MGL is a leading natural gas marketing company in Maharashtra. In Q3FY18, the company’s 69% of revenues came from CNG and 31% from PNG. As of December 31, 2017, the company had a PNG network of ~10 lakh households as well as a network of 212 CNG stations. Moreover, the length of the pipeline network of the company stood at ~5,000km. MGL is the sole authorised distributor of CNG and PNG in Mumbai, Thane and Raigad.

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