Gas Utilities – Industrial PNG, CNG volumes likely to be hit

We evaluate the impact of COVID 19 on CGD sector and trends in domestic gas costs, LNG and crude. COVID 19 can hurt CNG and industrial PNG volumes in the near term prompting us to lower our FY21e/22e volumes by 18-25%/8-12%, which results in 22-33%/9-13% cut in FY21e/22e EPS. But the sector is helped by lower domestic costs and softer LNG prices amid flattish petrol/diesel prices despite lower crude. We prefer GUJGA (Buy) and MGL (Buy) over IGL (Hold).

CNG: With commuting sharply impacted, we estimate CNG volumes (~ 75% of MGL/IGL volumes, ~ 15% of GUJGA volumes) to be ~ 90% lower than normal during lockdown in Mumbai and Delhi. This could lead to ~50% y-o-y decline in overall volumes in Q1FY21e for MGL/IGL.