MGL stock on fire since results, despite muted volume growth

Mumbai: Shares of Mahanagar Gas Ltd (MGL) have risen by about 7% since the city gas distributor announced its September quarter earnings early last week.

This is at a time when volume performance was below expectations. The company’s September quarter volumes increased by just 1.3% year-on-year. This is the second quarter in a row that the volume growth remained uninspiring. Recall that June quarter volume growth was 3.3%.

Despite the subdued volumes, the MGL stock is burning brighter since its September quarter results. What gives? Investors seem to be pleased with the company’s margin performance. “Indeed, margin expansion led to 4% beat in Ebitda in the September quarter (up 21.1% year-on-year, down 1.5% quarter-on-quarter) but the quality of earnings growth was a tad disappointing,” said analysts from Jefferies India Pvt. Ltd in a report on 11 November. Ebitda stands for earnings before interest, tax, depreciation and amortization.