Shares of Mahanagar Gas on fire after Q2 results

Shares of Mahanagar Gas Ltd (MGL) have increased by almost 8% since the city gas distributor announced its September quarter results last week. This is when volume performance was below expectations at just 1.3% increase over the same period last year. This is the second quarter in a row that the company’s volume growth has remained muted. During the September quarter, MGL’s compressed natural gas (CNG) volumes, accounting for a lion’s share of total volumes, grew slowly by 1%. The remaining volumes, coming from the piped natural gas (PNG) segment increased by 2.2%.

Despite the subdued volumes, the MGL stock is burning brighter since results. What gives? Investors seem to be pleased with the company’s better than expected profits, especially the margin beat. Net profit of Rs270 crore was far ahead of Rs188 crore, estimates of a Bloomberg poll of analysts. MGL was able to almost double its net profit during the September quarter, thanks to robust margins and a deferred tax write back.