Indraprastha Gas, Mahanagar Gas, Gujarat Gas benefit from lower gas costs aiding Q2 margins and volumes

Amidst looming threat from Electric Vehicles, City Gas Distribution companies such as Indraprastha Gas Ltd(IGL) have seen their stock price dip to 52-week lows in November. Gujarat Gas Ltd facing competition and volume pressure in its industrial segment also has seen its stock price see upside under check. Nevertheless all these companies have reported decent September quarter performances.

The operating performance of Indraprastha Gas, Gujarat Gas and Mahanagar Gas Ltd was lifted by lower natural gas prices. Analysts at Nuvama Institutional Equities said that the aggregate Ebitda grew 15% year on year and 5% sequentially for companies in their coverage universe. This was led by 89% and 25% YoY rise in Mahanagar Gas and Indraprastha Gas Ebitda. Ebitda stands for Earnings before interest tax depreciatio n and amortisation.

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Motilal Oswal Finacial Services Ltd in their result review said that City Gas Distribution companies' margins beat estimates (except for Mahanagar Gas)). The Volumes were in line: Gujarat Gas Ltd totals sales volume too came in line with their estimate at 9.3mmscmd (million metric standard cubic meter per day) with Morbi volumes remaining flattish at 4mmscmd. Morbi cluster in Gujarat is the industrial cluster for gas supplies by Gujarat Gas. Gujarat Gas Ebitda margin at ₹5.8 per scm (standard Cubic meter) beat their estimate of ₹4.2 per scm.

 Mahanagar Gas reported lower-than-estimated Ebitda of around ₹480 Crore versus their estimate of around ₹510 crore, mainly led by lower-than-estimated Ebitda per scm of ₹14.6 versus their estimate of ₹15.5. Volumes were in line with our estimates at 3.6mmscmd. IGL’s Ebitda of ₹660 Crore beat their estimate, led by higher-than-estimated Ebitda per scm at ₹8.6 versus estimate of ₹8. The volumes were in line with Motilal Oswal estimates at 8.3mmscmd.

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Low gas cost aided margins and volume growth said Nuvama Institutional Equities even though EV threat is looming. Volumes growth for Mahanagar Gas, Indraprastha Gas and Gujarat Gas was led by price cuts on Kirit Parikh Committee recommendations rollout. Management Commentaries as per Nuvama imply continued volume recovery.

Meanwhile for other Gas companies, the operating performance remained strong. Gujarat State Petronet Ltd’s Ebitda rose 23% YoY on 23% YoY uptick in volumes and high tariffs. Petronet LNG  Ebitda fell 4% YoY on lower realisation as spot eases offset by a 16% YoY volume uptick. GAIL’s Ebitda rose 98% YoY on strong transmission (higher volumes and tariffs) partly offset by weak petchem segment.

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