Mahanagar Gas Limited — Investor Meet, 04-02-2025: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** Mahanagar Gas Limited reported a cumulative net profit after tax of INR 793 crores and an EBITDA of INR 1,131 crores for the nine months ended December 31, 2024. For Q3, the net profit stood at INR 225 crores, with EBITDA at INR 313 crores. Average gas sales increased 12.75% year-over-year, hitting 4.006 MMSCMD, driven by strong growth in CNG (up 11.44%) and industrial/commercial segments (up 25.52%). Despite a slight margin compression due to late price hikes and increased gas procurement costs, management anticipates margins stabilizing around INR 9-11 per SCM.

**Future Outlook and Growth Drivers:** Management remains optimistic about growth, projecting an annual increase of approximately 10% in CNG volumes, supported by positive regulatory developments aimed at reducing diesel and petrol use in Mumbai. The company is diversifying into new energy by investing in batteries for electric vehicles, enhancing its growth prospects.

**Order Book and Operational Updates:** MGL connected 98,469 domestic households in Q3, reaching a cumulative total of 2.68 million. The company added nine CNG stations, bringing the total to 361. UEPL operations are progressing, with an investment of INR 35 crores for a 44% equity stake in a lithium-ion battery JV expected to generate revenue within 1.5 years.

**Analyst Q&A Insights (Detailed):**

- **Revenue and Profitability:** Analysts sought clarification on sales projections and margins. Management indicated a cautious outlook on margins but pointed to adjustments in procurement strategies as a mitigating factor.

- **Market Position and Competitive Landscape:** The impact of the Mumbai High Court directive aimed at pollution control could significantly boost CNG adoption. Management reiterated its commitment to expanding infrastructure to support this transition.

- **Operational Challenges or Risks:** Concerns were raised about gas allocations; however, management reassured that existing contracts cover approximately 1.45 million MMSCMD.

- **Capex and Capital Allocation:** MGL plans a capex of around INR 200-250 crores in Q4, with a focus on expanding pipeline networks and ramping up CNG infrastructure.

- **Strategic Priorities and Long-Term Vision:** Management emphasized investments in renewable energy and mitigating environmental impact, positioning MGL as a key player in India's transition towards cleaner fuel.

**Market or Regulatory Updates:** Recent judicial decisions are expected to enhance MGL's operational landscape by promoting CNG as an alternative fuel, similar to analogous shifts observed in the Delhi region.

**Strategic Focus Areas:** Management underscores a commitment to innovation and sustainability, with plans to pursue new energy solutions while continuing to enhance the existing infrastructure for CNG distribution.

**Investor Insight:** Given the robust financial health and potential for sustained growth driven by regulatory support and market dynamics, the positioning aligns with a 'buy' perspective, particularly considering MGL's strategic initiatives and its capacity to adapt to evolving energy demands.