Shares of city gas distribution (CGD) companies, Indraprastha Gas (IGL) and Mahanagar Gas (MGL) hit their respective 52-week lows on the BSE in Wednesday’s intra-day trade after the companies reported a disappointing set of numbers for the quarter ended December 2021 (Q3FY22) and amid concerns of aggressive influx of electric vehicles (EVs).
IGL and MGL supply compressed natural gas (CNG) to the transport sector and piped natural gas (PNG) to the domestic industrial and commercial sectors.
Among the individual stocks, MGL slipped 6 per cent to Rs 781.20, down for the fourth straight trading day. The stock has tanked 39 per cent from its 52-week high of Rs 1,284 touched on June 16, 2021.
In Q3FY22, MGL’s earnings before interest tax and depreciation and amortization (ebitda) margin declined 28.66 per cent from 43.06 per cent, mainly due to increase in administered pricing mechanism (APM) and market determined gas prices. The company’s net revenue from operations grew 72 per cent year-on-year (YoY) at Rs 2,473 crore. Net profit was up 14.34 per cent at Rs 465 crore on YoY basis.
Shares of IGL were down 3 per cent at Rs 379, also its 52-week low on the BSE in intra-day trade today. The stock has corrected 37 per cent from its 52-week high of Rs 604 hit on September 14, 2021. In Q3FY22, the company’s Ebitda margin declined to 21 per cent from 35 per cent in Q3FY21. The volumes were strong both YoY and QoQ during the quarter. Total volumes stood at 7.7mmscmd (+22 per cent YoY), with CNG volumes at 5.6mmscmd (+26 per cent) and PNG volumes at 2mmscmd.
IGL could increase its sales volume from new areas such as Rewari, Karnal, and Muzzafarnagar; Haryana City Gas; and the newly awarded GAs in the 10th round —Kaithal (Haryana), Ajmer, Pali, and Rajsamand (Rajasthan), and Kanpur, Fatehpur, and Hamirpur (Uttar Pradesh).
However, the introduction of EVs could dent CNG demand over the long term, which is well acknowledged by the company as well, and so it plans to set up 50 EV battery swapping stations. Its entry into new ventures (along with LCNG stations) will ultimately result in margin dilution for CGDs, Motilal Oswal Financial Services said in result update with ‘NEUTRAL’ rating on the stock.