Mahanagar Gas Ltd - a natural monopoly


(Prash) #81

As I see, adding new customers or connections only will increase the top line. How is this number growing.?
Also any commentary from management on estimates for new connections over next 12 months? How much more scope for expansion in Mumbai?

Selling price increase due to increase petrol/diesel price, will it result in any bottom line improvement?


(Sandeep) #82

Please participate in the concall scheduled for tomorrow regarding the details on the number of customers added etc.

http://www.bseindia.com/xml-data/corpfiling/AttachHis/908dcd9b-4e92-4f8f-bddd-c81a09629b43.pdf


(Chemist) #83

20171110_Mahanagar-Gas-Limited_44_QuarterUpdate.pdf (471.3 KB)


(samip2u) #84

Hi Sandeep,
i couldnt attend the concall… howver did the management able to answer the following Qs:
how the volume growth can be looked at for next 12 months ?
any color on Mumbai expansion market… including thane region ?

would be thankful if someone happen to shed some light from the call…


(Ajith) #85

(samip2u) #86

The comment sounded more or a generic growth prospect without any clarity on why they expect the growth in the volumes…


#87


#88

Volume growth should pickup and to be in the range of 6 percent approx for H2. Things looking up and expect upsurge in GA3 .
Looking at opening 3-4 stations in Karjat; 1 in uran ; 2 Mumbai- Pune expressway .
Total 9 new stations in Q3 and and approx 6 in Q4 .
Major capex going to be in Navi Mumbai, Thane , Kalyan & Ambernath.
Volume growth in Kalyan and Dombivali is 15-20 % but small if you take overall aggregate .


(vivek423) #89

I think MGL could become a cash generation machine - something like a See’s candies. By management’s own admission, they are underpricing to acquire customers. They will have significant room to increase prices a few years down the line once they have met their growth targets. The only issue is there isnt a Warren Buffet to force their price increases. And as a GAIL promoted company, government may prevent them from utilizing their pricing power entirely

Disc: Invested


(sko5prasad) #90

Agreed,
It has potential to become true cash generation machine. But 2020 Mumbai license renewal will be key to their future roadmap and also 200 city gas distribution license which is about to be floated will be crucial for sector to prosper.


#91

2020 license renewal shouldn’t be problem as per managment and past precedents of renewals being awarded.

Below article predicts that gas distribution companies will report steady earnings


(AKGupta) #92

I have been tracking this company for some time now and think it has real competitive advantages both over other forms of fuels and other companies.
Here is an extract from the Q2FY18 concall about their pricing formula: (if you think about it, they are always at a price advantage, no matter the input cost increase!)

I will be closely tracking their bidding aggressiveness for other cities, Raigad expansion progress. Lots of opportunity in this scrip from the long term. Their moat will not extinguish unless we enter into the age of electric mobility which is at least 10 years away. Also, as noted by the management too, electric vehicles will displace the more polluting fuels first and only then CNG.

Disc: Invested


(Marathondreams) #93

Good results from MNGL. YOY Revenue up 15% , PAT up 25%


(Ajith) #94

As was stated by the management in Q2 concall, the volumes are up by close to 2%.
I hope when we see more growth triggers realized, we will see even better volumes.
The recent surge in oil prices augurs well for the company as they cap their baseline prices as a function of alternative fuels with at least 10 percent margin.

The recent correction offered a good entry.

Disc: Invested


(AKGupta) #95

Anybody got notification of MGL dividend ? It was supposed to be ex-dividend on 20th Feb but I didn’t receive any notification of the same.


(JayNach) #96

Thanks for the indepth analysis and discussion:

Couple of questions I have are:

  1. Any reasons for such low volume growth inspite of almost doubling CNG customer base from FY13 to FY17 (2.9 lakh to 5.4 lakh vehicles respectively). Given the cost benefits of CNG and Mahanagar being a virtual monopoly. Are customers not using CNG as much?
    Source/Links for numbers above:
    https://www.mahanagargas.com/UploadedFiles/_MGL_Investor_Presentation_Sept_2017_Final_017ad18e76.pdf

  2. Bit far fetched but long term sochna padta hai: The threat from electric is real in the long run. I read that hydrogen is going to be the sustainable fuel in future. Can the same infra and pipes be used or can hydrogen be blended with Natural Gas in future?
    Would you guys even worry about this right now?

Link to research report: https://www.nrel.gov/docs/fy13osti/51995.pdf

My 2 cents:Since there is huge sunk cost in petrol vehicles that have already been bought, customers may prefer to convert to CNG rather than getting rid of their petrol cars. So CNG will continue to be a backup/alternate fuel even when electric cars get adopted in a big way.


(AKGupta) #97

Usually I don’t pay attention to trading stats everyday but today MGL had highest volume of 3 months and declined by 3%+. Do you guys think this is kind of like insider trading ahead of results or some other negative news?


(Balusu Aditya) #98

I would also like to know if anyone knows anything about why it dropped 3%. Not that it matters that much but it is better to be in the know than not.


(Ajith) #99

Recently I read that Maharashtra government formed a probe unit and ruled that CNG vehicles must have CNG inspection certificate every three years. This was due to malpractices of some companies during CNG installation on vehicles. The cab drivers are not obviously pleased with this inspection rule. So they went on to strike. Some details here. http://www.dnaindia.com/mumbai/report-mumbai-is-your-cng-cab-travel-safe-2600481


(AKGupta) #100

As good an explanation there can be, though this is exactly the kind of short term thinking which prevents people from making good money in the markets!
It’d be good to know how much does an inspection cost but it’s once in 3 years so any cost will easily be offset by the benefits of CNG from a running cost perspective.
Also these kind of strikes don’t last for long since drivers have to make money too! So at most it’ll be a temporary blip in MGL’s P&L.
Hope they get Nasik and Aurangabad in upcoming bid rounds.
Bullish for this company’s prospects and willing to add more if it corrects to 900~! But willing to change my mind too if this issue is more than it appears to be!