Mahanagar Gas: Good Performance continues in Q3FY17

Mahanagar Gas or MGL (Market Price Rs. 920 on 10/2/17) is the sole authorized distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai and its adjoining areas and Raigad district in Maharashtra. MGL is jointly promoted by Gail and BG Asia Pacific Holdings Pte Ltd (British Gas). MGL came out with an IPO which closed on 23/6/2016 and though it received good response there were many skeptics who believed that its performance will be subdued compared to Indraprastha Gas (IGL). A review of MGL at the time of IPO was done earlier Click Here

After hovering in the price range of Rs. 500 for few months after listing, stellar performance form MGL in every quarter after listing has been reflected in its Market price making sharp up moves. As on date MGL IPO has given the 2nd highest returns to Investors of the tune of 118.5% on the IPO price ( First one is Infibeam corporation)

The company’s volumes have increased at a CAGR for more than 6% in last five years. Favorable gas policies of government’s and increasing voices to protect environment gives MGL a distinct advantage and could pave the way for strong volume growth in future.

Q3FY17 Quarterly Results

	Dec-16	Sep-16	Jun-16	Mar-16	Dec-15
Income from Operations	550.58	571.34	530.7	557.87	563.5
Other Operating Income	3.46	2.84	3.44	3.55	3.05
Tot Income from Operations	554.04	574.18	534.14	561.42	566.55
Net Income aft Excise	500.55	518.05	506.7	512.59	480
PBIDT	179.55	176.51	164.68	149.21	137.41
Interest	0.46	0.11	0.53	0.49	1.58
PBDT	179.09	176.4	164.15	148.72	135.83
Depreciation	24.73	23.11	21.61	21.04	22.17
PBT	154.36	153.29	142.54	127.68	113.66
Tax	55.36	51.05	49.81	43.1	24.59
Profit After Tax	99	102.24	92.73	84.58	89.07
Equity	98.78	98.78	98.78	89.34	89.34
Face Value	10	10	10	10	10
EPS (not annualized)	10.02	10.35	9.39	9.47	9.97
EPS (TTM)	39.23
Price	920
PE (TTM)	23.45
Qtrly Sales yoy	4%
Qtrly NP yoy	11.15%
Qtrly Sales qoq	-3.38%
Qtrly NP qoq	-3%
PBIDTM	35.87%	34.07%	32.50%	29.11%	28.63%
NPM	19.78%	19.74%	18.30%	16.50%	18.56%

Assessment:

MGL has turned in a strong performance for Q3Fy17. While operational income growth has been mooted due to decrease in gas prices, MGL margins are on an upswing.
MGL has taken the lead and plans to introduce two wheelers on CNG in Mumbai.
MGL is positioned strongly in a business that has good growth prospects and there are some entry barriers too.
In the next 5 years, the company plans to add 83 CNG stations and 675 kms of steel and PE pipeline.
MGL paid a good dividend of Rs. 17.5 in FY 2916 and has now declared an Interim Dividend of Rs. 8/-.
MGL Margins are expected to remain stable/strong going forward and the stock could see better valuations.
Based on EPS(TTM) of 39.23, the stock is trading at a PE of 23.5 which leaves scope for appreciation when compared with IGL which is trading at a higher PE.

Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.