Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahanagar Gas Ltd (BOM:539957, Financial) commissioned 36 new CNG stations and upgraded 45 existing ones, marking the highest number achieved in the company's history.
- The company provided 320,125 new domestic PNG connections, with a total of 330,000 connections including its subsidiary Unison Enviro.
- Mahanagar Gas Ltd completed the acquisition of 100% stake in Unison Enviro Private Limited, making it a wholly-owned subsidiary.
- The company achieved the highest volume of sales at 3.609 MMSCMD, a 5.45% increase from the previous year.
- EBITDA for the financial year increased by 56% to INR1,843 crore, and net PAT increased by 63% to INR1,289 crore.
Negative Points
- Operating expenditure saw a significant increase, with other OpEx rising sharply and OpEx per SCM reaching the highest level in the last six quarters.
- The company spent over INR25 crore on marketing schemes for CNG vehicles, which is a one-time expenditure.
- Net PAT for the quarter decreased to INR265 crore from the previous quarter's INR317 crore.
- There was a muted quarter-on-quarter growth in CNG volume, with only a 1% increase.
- The company faces challenges in managing the growth and fluctuations in sales volume, foreign exchange, and costs.
Q & A Highlights
Q: In terms of the cost in this quarter, there seems to be a sudden increase in the operating expenditure. Can you explain the reasons for this?
A: In line with the volumes increasing, some volume-linked expenses have gone up, such as power and fuel, transportation, and dispensing charges. Additionally, there was an increase due to marketing schemes introduced for the promotion of CNG vehicles, accounting for more than INR25 crore during the quarter.
Q: What was the priority gas allocation as a percentage this quarter, and is that the primary reason for the QoQ increase in gas cost per unit?
A: This quarter, we received around 74% APM compared to our sales in the priority sector. Despite this, the weighted average gas cost remained well under control, around 7.25 to 7.3 MMBTU per dollar.
Q: How is the management planning to deploy surplus cash flows, considering the improvement in operating and free cash flows?
A: We have already spent around INR560 crore on the acquisition of Unison Enviro and invested INR50 crore in 3ev Industries Private Limited. Additionally, we plan to invest in setting up a CBG plant and have proposed a final dividend of INR18 per equity share for FY23-24. We are also focusing on increasing CapEx to tap potential in our licensed areas.
Q: Can you provide details on the vehicle additions in Q4, specifically the number of CNG vehicles and their types?
A: In Q4, we added slightly more than 20,000 CNG vehicles, including about 13,000 private cars, 5,400 autorickshaws, and 1,400 small commercial vehicles. Additionally, MSRDC has converted and brought 300 buses on the road, with 100 more expected in the next one or two quarters.
Q: What is the breakup of the intangible asset of INR520 crore in the consolidated balance sheet?
A: The major intangible assets for CGD entities include the valuation of the authorization, customer relations, established workforce, and the structure of the ongoing business. The primary component is the license authorization, which grants the right to market gas to all customers in the licensed areas.
Q: Can you provide the breakup of term contracts in terms of Henry Hub, Brent link, and KGDC HPC?
A: We have 0.75 MMSCMD under Henry Hub, around 1.1 MMSCMD under Brent link, and roughly 0.45 MMSCMD under HPHT term contracts. Currently, we are not fully utilizing the Henry Hub contract.
Q: What are the plans for capital deployment in the coming years, and how does the management view the potential for increasing dividends or acquisitions?
A: We plan to spend more on CapEx, targeting higher numbers of CNG stations and domestic connections. We have also invested in Unison Enviro and 3ev Industries. The proposed final dividend for FY23-24 is INR18 per share, totaling INR30 per share for the year. We are open to exploring new opportunities for acquisitions and investments.
Q: What is the expected volume growth for FY25 and FY26?
A: For FY24-25 and FY25-26, we expect volume growth to be in the range of 6% to 7%. Our internal targets are more aggressive, but we anticipate growth driven by both CNG and industrial and commercial segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
