At a recent industry gathering, the Indian oil minister stated that the government is prepared to take action to guarantee that end users receive the full benefits of the gas reforms. Analysts are concerned that this could put pressure on the profit margins of city gas distributors like Mahanagar Gas Ltd.
Citi Take
Citi ascribed its apprehensions to the recent remarks made by the oil minister during an industry gathering. The minister indicated that the city gas distributors' good financial performance indicates that end-users have not yet reaped the full advantages of the government's gas reforms. The brokerage also brought attention to the announcement made in February 2024 by the Petroleum and Natural Gas Regulatory Board that it will form a high-level expert team to examine the current regulatory structure. According to Citi, this could lead to an overhang about the viability of large profits for distributors of municipal gas.
Danger To The Margins Of Mahanagar Gas
Mahanagar Gas's premium margins make them more vulnerable to any future severe measures the government may decide to implement. The brokerage stated that any actions taken might rekindle worries about margins and exclusivity Given its current per unit EBITDA margins of Rs 13 per standard cubic meter of gas compared to its competitors Indraprastha Gas and Gujarat Gas, Mahanagar Gas stands to lose more than those of its rivals, according to Citi.
Mahanagar Gas Cuts CNG Prices
With effect from 12 a.m. on March 6, Mahanagar Gas has also lowered the price of CNG in and around Mumbai by Rs 2.5 per kg to Rs 73.5 per kg. The price reductions resulted from lower input prices for gas When comparing MGL's CNG price to that of gasoline and diesel, customers may currently save 53% and 22%, respectively.
Street Wrap
Citi reduced Mahanagar Gas Ltd.'s ratings to "sell," citing the company's higher margins that are vulnerable to regulatory pressure. The firm also lowers the target price of the city gas distributor by 5% to Rs 1,405, citing the possibility of longer-term declines in EBITDA margins per unit. Twenty of the 34 analysts who are following the stock have a "buy" recommendation, eight suggest a "hold," and six indicate.
Citi reduced Mahanagar Gas Ltd.'s ratings to "sell," citing the company's higher margins that are vulnerable to regulatory pressure. The firm also lowers the target price of the city gas distributor by 5% to Rs 1,405, citing the possibility of longer-term declines in Ebitda margins per unit. Twenty of the 34 analysts who are following the stock have a "buy" recommendation, eight suggest a "hold," and six indicate a 9.2% possible downside.
Citi reduced Mahanagar Gas Ltd.'s ratings to "sell," citing the company's higher margins that are vulnerable to regulatory pressure. The firm also lowers the target price of the city gas distributor by 5% to Rs 1,405, citing the possibility of longer-term declines in Ebitda margins per unit. Twenty of the 34 analysts who are following the stock have a "buy" recommendation, eight suggest a "hold," and six indicate a 9.2% possible downside.