Just went through their latest annual report and earnings call transcript.
Here are my findings:
- MGL is currently is focused on Mumbai, for which the exclusivity ends by 2020. But, the barrier of entry is quite high and it favors MGL in this case
- In Mumbai itself, as per their earnings call, only 30% of the market is addressed as of now. So, even if MGL captures another 30%, that is a decent number to look at in coming years
- They are seeking to increase their run rate from 160k (current) to 200k connections per year. This would directly impact their revenue in a positive way
- MGL is looking at expanding beyond Mumbai. This can very well be a possibility given the push towards CNG for cleaner cities (about 300 cities potentially would adopt CNG). Currently MGL is looking / bidding at 20 cities to expand and the results will be out on October.
- They are looking at mobile dispensing units. These would increase capacity greatly without much increase in investments in land and other facilities.
- Right now, the demand is good, resulting in long queues in the CNG stations. It is a matter of increasing capacity.
- Currency risks due to the depreciation of rupees
- Induction cooker can be a challenge to the use of natural gas. In the earnings call, the management referred to traditional electric stoves. But as it is happening in places like Singapore, gas will eventually be replaced by modules with inbuilt induction cookers. But, this is atleast 5 years in the future to have an impact.
- Electric vehicles can be an alternative. But, this is also a much further down in future.
Overall, this is a boring business with just same old stuff done with a simple demand-supply equation. But, with demand being consistent, boring is definitely good. I think this has a good potential to yield about 15% CAGR with the current business and with growth kicking in (aggressively expanding to other cities), I assume it could be as high as 20-25% CAGR.