Interesting read… just one regulatory overhang remains - that of PNGRB - http://www.business-standard.com/content/b2b-chemicals/exclusivity-in-city-gas-distribution-network-to-affect-competition-117020800516_1.html?src=email
MGL is showing weak ichimoku signal with “Sell” signal (Chikou crossed the price from above to below the price; T crossed K).
The news from moneycontrol gives an interview of SM Ranade, CFO of MGL. Compared to Indraprastha Gas, MGL growth is muted. CFO explaned that degrowth is because of demonetization.
Ranade explains: “there is a huge amount of expansion opportunities available in Mumbai, our authorised regions itself for example if we talk of mainland Mumbai, we are at around 25-30 percent penetration level so good scope is there over in Mumbai region. Even in the adjacent areas of Navi Mumbai, Thane district what we refer to, there is also similar type of penetration and maybe two years down the line there will new area of Raigad district which will be coming because there has been some announcement about new airport also coming, now formerly really launched and I think that will give us lot of opportunities for expansions”
natural gas prices have been marginally cut for Apr - Sep 17 period to USD 2.48 per mmBtu from USD 2.5 per mmBtu. Positive for Gas distribution companies
Mahanagar Gas is richly valued. Vulnerable to big fall with market volatility.
Excellent earnings growth in results in the wake of a flat topline. Strong evidence of pricing power.
No growth in revenue should be a concern as growth on margins can’t survive standalone. Pl share your views.
The flat volume is a cause for concern but MGL is slowly expanding its footprint on many fronts so i remain cautiously optimistic. I think the margin profile will remain intact at least for the next year due to the following reasons :-
Penetration levels are 25%-30% in mumbai & thane district. So there is decent scope ahead on that front.
The raigad district will come up in 3-4 yrs and ongoing developments in the navi mumbai international airport in raigad district will be a key trigger going forward. There seems to be some visibility on that front with development work already started.
Brent prices have gone up since the last 5 odd months after touching their historical lows and are expected to strengthen making natural gas more attractive. Once the exclusion of natural gas from GST and inclusion of fuel oil in GST issue is resolved there will be better clarity on this front.
They are actively scouting for M&A options & PNGRB bidding rounds. The 560 cr kitty that they have will allow them to move quickly. But there is currently no visibility on that front.
MGL has launched a CNG kit for two wheelers. Currently covers scooters, including the largest selling - Honda Activa. Reduces cost/ km to 60p. With petrol it comes to about 1.2-1.5 I believe. No information on cost of kit.
Got to know that Mahanagar Gas leak happened in Chembur (Mumbai).
Disc - Not invested
Here is the link -
Leaks and all notwithstanding, mgl marches on. The companies con calls mention that poor infra and land avaliability are a big bottlenecks barring that demand far outstrips supply. They also mention that work is suspended in the monsoons and regular maintenance work cannot be carried out during this period. Poor infra and monsoons are probably the root cause of these leaks i guess.
Result is strong. However, stock fell by close to 10%. Are we missing anything here?
Edelweiss gives a target price of 1187.
The most attractive part of MGL is consistent earnings growth.
In relation to its earnings growth I think that its reasonably valued and has limited downside. Of course, it will have some price shocks now and then in tune with the general ebb & flow of the market but one needs to give it some flexibility. Also the fact that it pays a decent dividend acts as further cushion
The volume growth is muted------ can we think of any valid reason
As we all know that the opportunity size is huge
I believe the only risk that MGL faces is mass adoption of e-rickshaws in the MMR region. As of now, the state government has not indicated any inclination towards the same and the reason could be the powerful unions of Mumbai. But we never know - this can and might change courtesy our Supreme court.
Disc - Invested.
Natural Gas will be included in GST soon as per some reports in June. What can be the impact? Does that pose any risk to MGL?