MGL — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
MR. S.M.
RANADE - CHIEF FINANCIAL OFFICER -
MR. RAJESH WAGLE – SENIOR VICE PRESIDENT (COMMERCIAL) – MAHANAGAR GAS LIMITED
January 30, 2019
Moderator · Conference Operator
Ladies and gentlemen good day and welcome to the Mahanagar Gas Limited Q3 FY2019
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019 coverage of City Gas Distribution and CNG network to about 326 cities and towns by 2022 to maximize the reach of natural gas across the country.
Coming to MGL, I may mention that MGL is expanding its CGD network in the existing areas of its operation.
During this quarter, 26,286 domestic households were added.
We have today more than one million household customers supplied with piped gas connection.
We have added over 77 industrial and commercial consumers and thus as on date we have over 3,700 industrial and commercial consumers.
We are now operating 224 CNG stations supplying CNG to 6,72,000 vehicles and our aggregate of steel and PE pipeline network stands at 5,181 kms.
With respect to our Raigarh GA we have about 3,311 domestic PNG connections in Uran and adjoining areas.
Gas supply to major towns like Pen, Uran and Karjat is being planned through the virtual pipeline network.
In January 2019, the company has received critical permissions from various authorities for laying pipelines in the area.
One CNG station was added during the quarter and with this, seven CNG stations are currently operational in Raigarh as on date.
During the quarter, we have seen a growth of 8.1% in overall sales volume over the corresponding quarter in the previous year.
CNG sales volume grew by 8.3%, Domestic sales volume grew by 11.6% while the industrial and commercial sector sales grew by 3.8%.
Overall the PNG volume grew by 7.5%.
Gross margin is higher in value terms in current quarter because of higher volumes in CNG and PNG and better price realization across all the customer categories.
However, Gross Margin percentage has declined to 48.8% as compared to 53.4% in the corresponding quarter in the previous year.
EBITDA margin was 31.8% at Rs.239 Crores in the current quarter as compared to 34.6% at Rs.201 Crores in the corresponding quarter in the previous year.
Net profit after tax grew by 19.6% from Rs.124 Crore in the corresponding quarter of the previous year to Rs.148 crore in the current quarter.
During the quarter, overall sales volume grew slightly by 0.1% compared to the sales volume of immediately preceding quarter.
CNG sales volume declined by 0.3% mainly due to Ola/Uber strike for approximately 15 days and school vacations during Diwali and Christmas.
Domestic sales volume grew by 6% and the industrial and commercial sector declined by 3.1% being impact of closure during festive season and lesser drawal of gas by certain industrial customers.
Overall, the PNG volumes grew by 1.2%.
Gross margin grew slightly to 48.8% as compared to 48.6% recorded in the immediately preceding quarter.
The Company, however, has improved EBITDA to Rs.8.77 per SCM as
January 30, 2019 compared to Rs.8.13 per SCM in the previous quarter.
Net profit after tax grew by 8.8% from Rs.136 Crores in the preceding quarter to Rs.148 Crores in the current quarter, enabled by improved sales realization.
With this, I conclude and would now like to open the floor for questions.
Thank you.
Moderator · Conference Operator
Thank you.
We will now begin the question and answer session.
The first question is from the line of Probal Sen from IDFC Securities.
Please go ahead.
Probal Sen: · As of now it is 6% to 7% is what we continue to target on a sustainable basis?
Thank you for the opportunity.
I had a couple of questions.
One, as in previous quarters is it possible to give the breakup of the industrial and commercial volumes for the quarter?
The second question I had Sir, in the previous quarter you got a notification from the PNGRB with respect to Raigarh for the minimum work commitment timelines and so on.
Just wanted to understand if there is any fresh update that you can share with us?
For the last few quarters consistently we have been beating our conservative guidance of 6% to 7% sustainable growth, so is it time for us to look at FY2020 and give a fresh guidance or are we still sticking to our 6% to 7% of target, Request your views on that?
As of now it is 6% to 7% is what we continue to target on a sustainable basis?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Probal Sen: · As of now it is 6% to 7% is what we continue to target on a sustainable basis?
Is that a fair way to look at it?
Thank you so much for your time.
Moderator · Conference Operator
Thank you.
The next question is from the line of Hemang Khanna from Kotak Securities.
Please go ahead.
Hemang Khanna
Thanks for taking my question.
My first question was on the line of vehicle addition, which has happened.
How has the trend been for the three wheelers addition, which was pretty strong in the previous quarters and in terms of taxis also what has been the additions?
Thank you so much Sir.
Moderator · Conference Operator
Thank you.
The next question is from the line of Upkar from T.A.
Wealth Advisors.
Please go ahead.
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Upkar
Good afternoon Sir.
Thanks for the opportunity.
I had a few questions and the first is how much is the revenues from Raigarh?
In percentage terms how much are we earning from Raigarh?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019 technologies prevalent all over the world.
There should not be any cause of concern and our topmost commitment to safety and other aspects will continue as usual.
Moderator · Conference Operator
We have the next question from the line of Rohit Ahuja from Bank of Baroda Capital.
Please go ahead.
Rohit Ahuja
Thanks for the opportunity.
I see your margin performance has been quite good this quarter, is there any outlook you can share with us, on whether you would be able to sustain margins at current levels given that oil prices are still lower compared to what we saw in the first half of this year.
Also as we move to the next year, you are eyeing a 7% volume growth/earnings growth which was 20% for this year and which could possibly slow down going forward, how do we see margins expanding from current level?
Moderator · Conference Operator
Thank you.
The next question is from the line of Jimesh Sanghavi from Principle Asset Management.
Please go ahead.
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Jimesh Sanghavi
Congrats on a good set of numbers.
A couple of questions from my side if you can share the realizations for the industrial and commercial segment and secondly if you can throw some light on the demand environment in this particular segment considering the fall in the crude oil prices.
Are we seeing any contraction in demand or any slowdown in demand in particular in this segment for the current quarter?
Moderator · Conference Operator
Thank you.
The next question is from the line of Krunal Shah from Enam Investment.
Please go ahead.
Krunal Shah
Sir, in the tenth round of bidding, how many gas areas do we plan to bid for?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Krunal Shah
One more question is that in the longer term, how do you see the threat of EV playing out for us the likes of e-rickshaw etc.?
Moderator · Conference Operator
Thank you.
The next question is from the line of Gagan Dixit from Elara Capital.
Please go ahead.
Gagan Dixit
We have observed that in the past three quarters your CNG volume growth is above what is your historical number, so do you want to revise your guidance for the CNG growth or we stick to the same 7% Y-o-Y growth going forward?
Moderator · Conference Operator
Thank you.
The next question is from the line of Pratik Chaudhari from Jefferies.
Please go ahead.
Pratik Chaudhari
Could you share some colour on what led to the strong margins in the quarter?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Pratik Chaudhari
The price hike in CNG and domestic PNG was known, but for the industrial side is there some lag if the oil price goes down and the LNG prices comes off, is there a lag in which it is passed to the end consumer, so did that help in the higher margins?
Moderator · Conference Operator
Thank you.
The next question is from the line of Jigar Shah from Maybank.
Please go ahead.
Jigar Shah
Good evening Sir and congratulations for a consistent performance.
My question is on the policy side, whether the state government plans to impose any restriction on some of the public transport and other vehicles to take mandatory measures to adopt CNG given that pollution is increasing.
Have you heard about any such policy in the works?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Jigar Shah
So currently 3 MMSCMD how much is Raigarh?
Moderator · Conference Operator
Thank you.
The next question is from the line of Sabri Hazarika from Emkay Global.
Please go ahead.
Sabri Hazarika
Good afternoon Sir.
Request more details on capex, basically your guidance from Rs.220 Crores to Rs.375 Crores now, how will it be divided between various segments?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Moderator · Conference Operator
Thank you.
The next question is from the line of Nilesh Ghughe from HDFC Securities.
Please go ahead.
Nilesh Ghughe
My question is on raw material prices, Sir if I look at sequentially the APM prices were up by about 10% and spot LNG prices were up by 15% compared to Q2, but still our raw material prices have gone up by just 7.6%, does that mean you are able to source LNG at lower prices and if yes then will the trend continue in the current quarter as well?
Moderator · Conference Operator
The next question is from the line of Vishnu Kumar from Spark Capital.
Please go ahead.
Vishnu Kumar
Thanks for your time Sir.
Just wanted to understand the next couple of years the capex that we are spending is it going to be more towards the Raigarh region and how much do we see in SCM terms would be the volume in the next two to three years, any broad range if you could just give the numbers?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Moderator · Conference Operator
Thank you.
The next question is from the line of Mani Kantha from Axis Capital.
Please go ahead.
Mani Kantha
What is the spot LNG price in Q3 and can you please give more details on how do you price the industrial and commercial PNG?
Moderator · Conference Operator
Thank you.
The next question is from the line of Mayur Mathani from ICIC Securities.
Please go ahead.
Mayur Mathani
Just wanted to know how much is the impact of lower buses addition on the volumes and how do you expect that to go forward?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Moderator · Conference Operator
Thank you.
The next question is from the line of Prayesh Jain from Yes Securities.
Please go ahead.
Prayesh Jain
Good evening Sir.
What is the share of CNG in the total population of Ola and Uber in the city roughly the number of CNG in Ola/Uber?
Moderator · Conference Operator
Thank you.
The next question is from the line of Aditya Gupta from Narnolia.
Please go ahead.
Aditya Gupta
Thank you.
Sir my questions are already answered.
Moderator · Conference Operator
Thank you.
The next question is from the line of Divya Singal from HDFC Securities.
Please go ahead.
Divya Singal
Other expenses during this quarter has gone up by about 12% Q-on-Q, 19% Y-o-Y, so is there any one-off in that?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019 versus Q2. As regard year-on-year the primary escalation is, the increase consists mainly for let us say power and fuel or CNG transportation by LCV or dispensing charges, all these accounting heads are prominent accounting heads and these are variable expenditure that the moment your volumes go up generally these expenses will vary almost 100% in proportion and having volume grown for nearly 9%, 10% that is why you find the increase on Q3 versus Q3 of previous year.
Divya Singal
Thanks.
Moderator · Conference Operator
Thank you.
The next question is from the line of Ayushi Mehta from CD Equisearch.
Please go ahead.
Ayushi Mehta
Good evening Sir.
I wanted to understand what is the revenue arrangement with OMC private franchise and own CNG stations?
Moderator · Conference Operator
Thank you.
The next question is from the line of Yogesh Patil from Reliance Securities.
Please go ahead.
Yogesh Patil
Thanks for taking my question.
Sir based on our calculation, domestic gas prices to rise by 13% from Apr 2019, will you be able to take the price hike in April 2019, and basically my question is in context to the general election?
Thanks.
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019
Moderator · Conference Operator
Thank you.
The next question is from the line of Rajesh Agarwal from Moneyore Investments.
Please go ahead.
Rajesh Agarwal
Sir, now the new BS-VI norms coming in by 2020, so the cost of diesel vehicles and hybrid vehicles will go up, so will you see a shift from diesel vehicle to more of CNG because petrol hybrid will be cheaper than the diesel and being a cleaner fuel will you see that shifting?
Moderator · Conference Operator
Thank you.
The next question is from the line of Tarun Lakhotia from Kotak Securities.
Please go ahead.
Tarun Lakhotia
Thanks for taking my questions, I have couple of them, one just on your margins front your unit EBITDA margin as we compute was Rs.5.6, Rs.5.7 per SCM in 2015-2016 and it has expanded to Rs.8.5 on a consistent basis for the past nine month of this year, can we say that given that there is still decent discount in CNG versus liquid auto fuels there is scope for these margins to expand further in the next few years or do you think the discount levels have narrowed off late, so this is more sustainable number rather than any further expansion from here on.
Secondly if you could just share the CNG volumes in Kg terms for the quarter?
MAHANAGAR GAS LIMITED · MR. RAJESH WAGLE – SENIOR VICE PRESIDENT
January 30, 2019 comfortable with Rs.8/SCM EBITDA.
Going forward there will be many factors on which it will be dependent upon, given today’s diesel price and whatever gas costs are there the discount levels have dropped a bit compared to the earlier levels when oil had reached significantly higher levels, so in fact the value proposition has come down, so we will have to observe other factors like exchange rates, spot gas prices, price of crude oil, macroeconomic factors, which will ultimately determine the margin trajectory.
Tarun Lakhotia
You mentioned a number of Rs.8 whereas you have done Rs.8.5 for nine months, I am sure for fourth quarter given that currency has appreciated your margins are likely to be similar or healthier than this right, since you just mentioned Rs.8 I just wanted to clarify that?
Moderator · Conference Operator
Thank you.
As there are no further questions, I would like to hand the conference over to the management for closing comments.
Thank you on behalf of Antique Stock Broking that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.