Tag: Mahanagar Gas (MGL)

Mahanagar Gas shares fall most on record after Citi cites regulatory risks to margin

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Mahanagar Gas fell as much as 16% on Wednesday after brokerage firm Citi downgraded the stock to “sell” from its earlier rating of “buy.” It also cut its price target on the stock to ₹1,405 from ₹1,480 earlier.

Citi has cited regulatory risk to MGL’s margin and has also opened a negative catalyst watch on the stock.

The brokerage said that it is concerned by the recent statements made by India’s oil minister Hardeep Singh Puri, where he said that end consumers have failed to fully benefit from the government’s gas reforms and that City Gas Distribution companies are continuing to enjoy higher profits.

The minister also said that the government may be willing to consider drastic steps to ensure that the consumers benefit, notwithstanding opposition from the industry.

Citi fears that this could translate into renewed concerns on exclusivity and margins, with MGL’s margin being more susceptible, given the premium it enjoys.

Mahanagar Gas shares are trading at 13 times the financial year 2026 price-to-earnings estimates based on Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of ₹11.5 per standard cubic meter (SCM).

On Tuesday evening, Mahanagar Gas cut prices of Compressed Natural Gas (CNG) by ₹2.5 per kilogram in and around Mumbai, citing a reduction in natural gas prices. The revised MRP of CNG, effective Wednesday, will be ₹73.5 per kilogram.

Gujarat Gas also reduced prices in the industrial segment last week due to a fall in spot LNG prices.

Out of the 34 analysts that have coverage on MGL, 20 have a “buy” rating, eight say “hold” and six have a “sell” recommendation.

Shares of Mahanagar Gas are trading 11% lower at ₹1,395. This is the biggest single-day drop seen in the stock since its listing in 2016.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CLSA upgrades IGL, raises price target on both IGL and MGL on favourable regulatory regime

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm CLSA upgraded Indraprastha Gas to buy while raised its price target on both IGL and its peer Mahanagar Gas, driven by more favourable regulatory regime and pricing power.

The brokerage has upgraded state-owned IGL to ‘Buy’ and raised its price target to Rs 585 from Rs 420 earlier, reflecting potential gains of around 37 percent.

CLSA also raised the Earning Per Share (EPS) forecast to 6-15 percent led by expected double-digit volume growth.

The brokerage on the other hand maintained its ‘Buy’ call on MGL and hiked the price target to Rs 1,260 per share, implying an upside of around 30 percent from the current trading price.

CLSA also raised the price-to-earnings (PE) multiple from 11x to 13x for MGL. The brokerage in a note mentioned that regulatory regime is expected to become more favourable for city gas distributors starting April, and pricing power would return.

CLSA noted that the gas pricing formula has proposed a price ceiling at $6.5 per mmBtu, which will drive a 24 percent cut in the price of domestic gas on April 1, 2023.

Also, despite the price hike CNG is still a favoured fuel and a push by OEMs should drive volume growth, it noted.

CLSA earlier had stated that a sharp 50 percent decline in spot LNG prices to $14 per MMBtu is a clear positive for most Indian gas companies.

The brokerage expects Indian city gas distributors like IGL, MGL and Gujarat Gas Ltd to see strong margins in the last quarter of the current fiscal due to the halving of spot LNG prices compared to that in December.

IGL supplies CNG and pipe natural gas to homes and industrial consumers in the Delhi-National Capital Region (NCR) and adjoining areas.

Shares of IGL are trading 3.3 percent higher at Rs 441, while those of MGL are trading 1.2 percent higher at Rs 982.10.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CNG, PNG prices hiked in Mumbai, check prices here

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coming into effect from Monday midnight, city gas utility Mahanagar Gas has increased the retail price of compressed natural gas (CNG) and piped natural gas (PNG) by Rs 6 per kg and by Rs 4 per standard cubic meter (SCM), respectively, in and around Mumbai.

Accordingly, the revised retail price of CNG will be Rs 86/kg, and domestic PNG will be Rs 52.50/SCM, MGL said in a statement on Monday evening.

The state-run company blamed the 40 percent increase in input prices by the government from October 1 for the steep increase in the retail prices along with the supply cut. The petroleum pricing and analysis cell of the oil ministry had announced new prices for the second half of the financial year on September 30.

Starting October 1, the domestically produced gas prices were increased by 40 percent. Earlier, the prices were increased by 110 percent citing rising international prices.

The government revises gas prices twice annually, from April 1 to September 30 and from October 1 to March 31. The price for October 1 to March 31 is based on the average price from July 2021 to June 2022.

Also Read: Here’s how piped gas prices in big cities like Mumbai and Delhi may move hereon

The company said the government had also reduced gas allocation to MGL by 10 percent. Owning to this, MGL is required to source at a substantially higher cost from the market. It also cited the fall in the rupee as another reason for the hike.

With the hike, the price savings between CNG and petrol is down to 45 percent now, while that of PNG and LPG is down to just 11 percent.

The rate paid for gas produced from old fields, which make up for about two-thirds of all gas produced in the country, was hiked to $8.57 per million British thermal units from the current $6.1. Simultaneously, the price of gas from difficult and newer fields like the ones in Reliance Industries and its partner BP-operated deepsea D6 block in KG Basin was hiked to $12.6 per mmBtu from $9.92.

These are the highest rates for administered/regulated fields (like ONGC’s Bassein field off the Mumbai coast) and free-market areas (such as the KG Basin). Also, this will be the third increase in rates since April 2019 and comes on the back of firming international prices. Piped natural gas price in the last year has risen by over 70 percent.

The price of gas from old fields, which are predominantly from state-owned producers like ONGC and Oil India, was more than doubled to $6.1 per mmBtu from April 1. Similarly, the rates paid for gas from difficult fields such as deepsea KG-D6 of Reliance went up to $9.92 per mmBtu from April 1 against $6.13 per mmBtu.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Govt’s move to cut CNG and PNG prices cheers IGL, MGL and Gujarat Gas investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of city gas distributors — Gujarat Gas, Mahanagar Gas and Indraprastha Gas — soared after the Central government diverted natural gas from industries to city gas operators to check the spiralling CNG and piped cooking gas prices.

At 1:59 pm shares of IGL were up by 7.8 percent from the previous close on the BSE. MGL shares were trading at Rs 858, an up of 5.58 percent. Gujarat Gas shares surged by 5.5 percent in the early morning session to Rs 479.5 per share.

According to the news agency PTI, the Ministry of Petroleum and Natural Gas amended an earlier order to increase the allocation of domestically produced gas to city gas operators.

The move follows a massive jump in CNG and PNG prices in the country in the last one year as operators used costlier imported LNG. CNG prices in Delhi went up by a massive 74 per cent (from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg now) while PNG prices rose by 70 per cent (from Rs 29.66 per standard cubic meter to Rs 50.59 per scm).

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According to officials, the allocation for city gas operators such as Indraprastha Gas Ltd of Delhi and Mahanagar Gas Ltd of Mumbai has been increased to 20.78 million standard cubic meters per day.

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By increasing allocations, the country will be able to meet 94 percent of its demand for gasoline for automobiles and piped gas for cooking. In the past, about 83 percent of the demand was met by GAIL’s import of LNG.

Meanwhile, brokerage firm Jefferies has maintained a ‘buy’ rating on the shares of IGL with a target price of Rs 450. The stock has enough room to raise the price, said the brokerage house.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CNG PNG Price hike: CNG and piped gas prices in Mumbai hiked again

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Mahanagar Gas” isinid=”INE002S01010″ bseid=”539957″ nseid=”MGL” sector=”Refineries” exchange=”nse”]Mahanagar Gas has hiked the retail price of compressed natural gas (CNG) and piped natural gas (PNG) by Rs 4/kg and Rs 3/SCM, respectively, in Mumbai. The revised costs were put into effect from midnight of July 12.

The state-run utility attributed the increase to the rise in input costs and depreciation of rupee.

Starting April 1, the Centre hiked the price of domestic and imported natural gas by over 110 percent. This had cancelled out the steep price reduction after the state slashed VAT to 3.5 percent.

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MGL in wait and watch mode for further price hikes; says co passing on LNG rate increase to customers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mahanagar Gas is in focus after the company recently hiked CNG prices by Rs 4 per kg. This is the third hike we have seen in the last six weeks as global prices continue to remain high.

In an interview with CNBC-TV18, Rajesh Patel, CFO at Mahanagar Gas, shed light on the price hikes and the outlook.

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He said, “LNG prices have been rising since July, from $12 to almost $20-25 per MMBtu now. In last six weeks, MGL has taken three price hikes. First two price hikes were on October 5th and the other was on the 14th of the same month. It was to mainly to cover the APM gas price announced by government from October 1.”

On any further price hikes, Patel said that whatever was taken is sufficient for some time, but the company will have to observe how things move.

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On margins, he said, “In case of industrial and commercial customers, company has been following the philosophy of pricing the customers based on the alternate fuels and so, link to pricing will be done in the case of the industrial and commercial sector and the risk of the gas price change is on the company. ”

“However, there is an enabling provision in the contract during such time to increase the premium link to the alternate fuel. So we have been taking enough steps to recover the current increase in the LNG prices. So to that extent, we are protecting our margins and with this passthrough we have been protecting our margins for the priority sector as well,” Patel mentioned.

On volumes, he said, “During the first half of the year due to COVID, allocations from the government were lower. Since more than expected growth came in from the month of May just after the lockdown was eased out, the volume pick-up with respect to CNG was quite high.”

“If you look at our volumes in Q2, we have clocked almost 30 percent overall increase in volumes and within CNG, it was a growth of around 44 percent over Q1,” Patel mentioned.

On-demand, he said, “Volumes in the industrial and commercial category have been showing an upward trend and there is a good amount of demand and pick up even at this price. So, I don’t think there is a reduction. If you look at our Q2 numbers, be it industrial, commercial or small restaurant category, everywhere there is an increase in the volume compared to the earlier quarter.”

For full management commentary, watch the video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

MGL hikes CNG, PNG prices. Check revised rates here

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Mahanagar Gas Limited (MGL) has announced a hike in prices of both compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai and neighbouring cities. The hike has come into effect from midnight of October 13.

Following this latest price hike, CNG price in Mumbai now stands at Rs 57.54 per kg while PNG will be available for Rs 33.93 per SCM, according to a tweet posted by MGL.

MGL announces the revised prices of CNG as ₹. 57.54/Kg and PNG ₹. 33.93/SCM in and around Mumbai w.e.f. midnight of 13th October, 2021.

— Mahanagar Gas Ltd. (@mahanagargas) October 13, 2021

“Being a customer-focused company, MGL has always tried to maintain price stability for its CNG and domestic PNG customers. However, since there has been an increase in gas prices, MGL has decided to progressively recover from such an increase in gas cost,” MGL said in a statement.

Meanwhile, Indraprastha Gas Limited (IGL) also increased the prices of both compressed natural gas (CNG) and piped natural gas (PNG) in Delhi-NCR and other cities, with effect from Wednesday.

CNG price in Delhi now stands at Rs 49.76 per kg, while PNG will cost Rs 35.11 per SCM. The CNG price in Noida, Greater Noida and Ghaziabad would be Rs 56.02 per Kg; while in Gurugram, it would be Rs 58.20 per Kg.

In a series of tweets on Tuesday, IGL announced the revised rates of CNG and PNG for various cities.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

For every $1/mmbtu gas price increase, profit for upstream cos will go up by 13-14%: Centrum Broking

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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APM gas prices will increase from tomorrow. From tomorrow, we will see a hike of around 60 to 70 percent, that is the expectation. It happens every six months, from April 2022 it is expected to increase by another 60 percent because of the surge that we have seen in global gas prices. Of course, it is a positive for gas producers, the likes of ONGC, Oil India, however, it is negative for the ones that are using it as input, so the likes of fertiliser companies, IGL, MGL and also the power companies which use gas could see some impact as far as the input costs are concerned.

According to Edelweiss, it is positive for ONGC, a hike of $1 per mmbtu will boost the profit before tax (PBT) by 14.50 percent on an annualised basis, but it also means that IGL and MGL will need to take 10 to 11 percent of price hikes, a lot of which they have already taken.

Jeffries has also put out a note, where they said that accounting for the price hike already taken, another 10 percent hike is required by IGL and Mahanagar Gas. However, the concern is for the price hikes that will come in from April 2022. Because if the current spike in international gas prices continue, domestic gas prices could touch as much as $9, that is in October of 2022. This could lead to a sharp reduction in EBITDA of all these user companies.

For Oil India, of course, there will be an increase in domestic gas realisation so Sharekhan expects it to increase to $3.8 per mmbtu, which is currently at around $2.5 per mmbtu. However, a lot of it is already priced in. Oil India is up 40 percent this month, ONGC up around 20 percent this month and both the stocks are still at reasonable valuations.

Probal Sen, senior VP at Centrum Broking, said, “The number that was mentioned about every dollar increase in average gas realisations has a 13 to 14 percent impact on profitability of both ONGC and Oil India, so obviously, I think we can probably make an educated guess on April 2022 prices. October will be based on June 21 to June 22 averages. So, I believe given that there are more than six months to go, things could change from here. But, clearly from April, on top of the almost dollar per mmbtu increase that we are likely to see from tomorrow, there could be another couple of dollars of increases. So yes, I mean upstream companies are clearly in a sweet spot irrespective of what is happening to their production numbers, just on the basis of pricing alone and you see that even crude has once again started to flare up. So, both these mean that earnings trajectory will be extremely high.”

He further added, “Despite whatever has happened to the stock, the fact is that ONGC is still just about 8.50 times one-year forward earnings, as per our basic earnings as I am talking standalone, so from that perspective, I would say there is definitely much more steam ahead as far as ONGC is concerned. Oil India, perhaps a little bit of the positive is already in the price. So I would much rather be adding more ONGC to my portfolio at these prices to play the price increase over the next 12 months.”

On city gas companies, Sen said, “I think at least for the October iteration, our sense is that the additional price increase required would be around Rs 3.50-Rs 4 for the domestic segments. If we go by past two years’ experience, any increase in domestic prices have been promptly passed on. Therefore, there is a decent chance that companies would pass it on straight away, depending on what the exact price is. We expect about $3.1 on an NVC basis to come through tomorrow. So, my sense is that they will pass it on.”

For the full interview, watch accompanying video.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

City gas distribution companies like IGL, MGL Gujarat Gas in a sweet spot: JM Financial

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices have rallied more than 26 percent to 13-month highs in both Brent and WTI since the start of the year. In our special segment, ‘Hunt For Value’, we take a look at how Q4FY21 is looking like and how are valuations shaping up for the oil and gas space.

Dayanand Mittal, Oil & Gas, Telecom Research Analyst, JM Financial Institutional Securities helped analyse the situation.

“Last one year rally on Bharat Petroleum Corporation Ltd (BPCL) has been on the back of this disinvestment newsflow and with the government focusing to close this deal in the first half of next year, there is more optimism around it,” he said.

“BPCL could be a big beneficiary assuming things go well,” he added.

“For GAIL, the biggest concern has been the weak crude prices because that has headwinds for both – gas trading business and weak crude price usually means weak petchem and liquefied petroleum gas (LPG) margins. So with crude price recovery the concerns on the gas trading business goes off. That has been a key concern for most of the investors. Petchem and LPG margins are also recovering. There is still scope for some upside even from current levels,” he added.

“In the oil and gas space, city gas distribution (CGD) companies are our preferred picks. It is a secular growth story. They also have very strong pricing power. Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) and Gujarat Gas are in a sweet spot, we prefer IGL followed by Gujarat Gas,” he stated.

For more, watch the video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Drop in raw material prices to give a fillip to city gas distribution firms, says CLSA

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The city gas distribution (CGD) companies are likely to benefit from a slew of positive reforms and falling raw material prices in the year 2020.

According to CLSA, CGD stocks such as Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) and Gujarat Gas are well-placed to gain from a decline in raw material prices, a slew of reform-linked tailwinds and rising competing fuel price.

The global brokerage reiterated ‘Buy’ rating on the stocks and raised its target price (TP).

CLSA raised Gujarat Gas EPS by 7-9 percent and target price to Rs 315 from Rs 270 earlier.

“Gujarat Gas is a play on tighter environment norms against the use of polluting fuels in small factories, even as soft LNG price remains a tailwind for the stock,” CLSA said in a report.

It raised TP for IGL to Rs 540 from Rs 510 and for MGL to Rs 1,425 from Rs 1,380 earlier.

“An approximately 23 percent fall in domestic gas price in April 2020 after the 12.5 percent cut in October 2019 will bring down raw material cost and boost volumes/margins. Inclusion of gas in GST, added push on CNG vehicles after BSVI adoption in April 2020, further tightening of norms against polluting fuels, and tax benefit on CNG vehicles are other possible tailwinds,” CLSA said.

The brokerage expects MGL’s infra exclusivity in Mumbai to be extended after it expires in 2020, which may remove a big overhang.

“MGL has the best risk-reward, IGL has the most consistent growth in the space, and Gujarat Gas is a play on weak LNG prices,” CLSA said.

Moreover, more than 15 percent rise in Brent crude price in the past three months on bigger cuts by Opec may drive up prices of competing fuels such as diesel and petrol.

This combination of falling raw material costs and rising competing fuel prices will further raise the discount of CNG/PNG to competing fuels, which will support volume growth as well as give room for additional margin expansion in 2020, the report added.

Continued depressed LNG prices could be another tailwind to support growth in the industrial and commercial sectors.

Further, the gas sector may see game-changing reforms in 2020. Being key gas consumers, city gas companies outside Gujarat may see big gains from the inclusion of gas in GST.

Any further action to curb the use of polluting fuels, as recommended by the National Green Tribunal, could be positive for CGD players such as Gujarat Gas, CLSA said.

There has been a demand to bring down the GST rate of CNG vehicles in-line with Electric Vehicles, i.e to 5 percent from 28 percent. If accepted, this would be a big positive for CNG demand.

Additionally, the 25-year period of infrastructure exclusivity for MGL’s Mumbai (GA-1) licence expires in May 2020. CLSA expects this exclusivity may be extended by 10 years, which could allay a big investor concern for MGL.

“This should also be taken as a positive read-through for IGL, which will see its 25-year infrastructure exclusivity in Delhi expire in 2023,” CLSA said.

High volume growth and weak LNG price should start a virtuous cycle for Gujarat Gas as higher industrial volume increases mix of cheaper spot LNG, which will bring down the unit raw material cost. This should attract more volumes and boost margins.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow