Accumulate Mahanagar Gas; target of Rs 1187: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahanagar Gas

MAHGL reported EBITDA/scm of INR6.8, largely in line with our estimate (PLe: INR7.0/scm), supported by steady volume growth of 2.6%/6.5% QoQ/YoY to 4.9mmscmd (PLe: 4.9mmscmd). This was partly offset by a 6.3%/25.9% QoQ/YoY increase in gas costs/scm. Volume growth was largely driven by healthy CNG/PNGDom volume growth of 9.1%/9.8% YoY, partly offset by a 7.5% decline in PNG-I/C volumes. Management maintained its FY27 capex guidance of INR15-18bn, which is largely towards PNG infrastructure, with 2HFY27 expected to be capex heavy. MAHGL may increase capex if needed. We moderate our YoY volume growth estimates to 7.0%/9.2% in FY27E/FY28E (previous- 8.0%/11.2%) factoring in curtailments of PNGI/C volumes in FY27 and build in 5.6% YoY growth for FY29E. We lower our FY27E EBITDA/scm estimate to INR7.0 (previous- INR8.0) due to higher gas costs in FY27E, while maintaining FY28E estimate at INR8.4/scm.

Outlook

We estimate FY29E EBITDA/scm at INR8.6. Maintain Accumulate, with a TP of INR1,187 (unchanged), based on 11x (unchanged) Sep’28E EPS.