Strong Q4 margin kindles Mahanagar Gas stock

MUMBAI: The lockdown that began in the last week of March was expected to take a toll on Mahanagar Gas Ltd’s (MGL) volumes during Q4 FY20. That has expectedly come through. The city gas distributor’s volumes declined by 9% compared to the December quarter and by 7% on a year-on-year basis.

What is encouraging is that the company’s profit margins have been resilient, thanks to a decline in gas prices. This, along with lower tax outgo, helped MGL post a healthy 25% year-on-year net profit growth at a time when revenues have declined.

Jefferies India Pvt. Ltd’s Pratik Chaudhuri wrote in a report on 10 June, “Ebitda margin expanded to ₹9.4 per standard cubic meter (3QFY20: ₹9/scm).” Note that this was just slightly ahead of Jefferies’ estimates of ( ₹9.3/scm), as operating expenses remained higher despite lower volumes. Ebitda is earnings before interest, tax, depreciation and tax — a key profitability measure.