City gas distributor stocks gain up to 9% post March quarter results

Shares of city gas distribution (CGD) companies Gujarat Gas Company, Mahanagar Gas (MGL) and Indraprashta Gas (IGL) rallied up to 9 per cent on the BSE in Wednesday’s intra-day trade after the companies reported better-than-expected results for the quarter ended March 2022 (Q4FY22).

Among individual stocks, Gujarat Gas surged 9 per cent to Rs 554.25 after it registered a 28 per cent growth in its consolidated net profit of Rs 444 crore in Q4FY22 as against Rs 348 crore for Q4FY21, whereas, total consolidated income grew by 36 per cent year-on-year (YoY) to Rs 4,791 crore as compared to Rs 3,514 in previous year quarter.

Meanwhile, sales volume declined 18.5 per cent YoY and 13.2 per cent quarter-on-quarter (QoQ) to 9.9 mmscmd. Besides that, gross margins increased Rs 3.6/scm YoY and Rs 6.1/scm QoQ to Rs 10.7/scm.

Gujarat Gas is a supplier of piped natural gas (PNG) and compressed natural gas (CNG) for industrial, commercial and domestic segments.

On the other hand, MGL’s net profit declined 38 per cent in Q4 to Rs 132 crore as against Rs 213 crore in the corresponding quarter a year ago. However, total income jumped 51 per cent to Rs 1,210 crore on higher realisation.

Analysts at ICICI Securities believe that the results of Gujarat Gas and MGL results were ahead of estimates on profitability front. "Earnings were driven by higher than expected realisation and gross margins. Media reports indicate that Gujarat Gas has hiked industrial PNG as well CNG prices to pass on increased costs to customers. In the medium term, maintaining balance between volume and margin will be key to the company's performance," the brokerage firm said.

Moreover, prices of domestic gas were increased in April and spot LNG continues to trade at a higher level. While MGL has further hiked prices of CNG and PNG to pass on increased costs, analysts anticipate management's commentary on volume trends and margin sustainability to be key monitorables going ahead.

At 10:00 am; CGD stocks were up in the range of 4 per cent to 7 per cent, as compared to 0.43 per cent decline in the S&P BSE Sensex. Despite of today’s run-up, in the past six months, CGD companies underperformed the market with decline between 17 per cent and 28 per cent. In comparison, the benchmark index was down 10 per cent.