Release Date: October 25, 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) connected 58,845 domestic households this quarter, bringing the total to approximately 2.58 million households.
- The company added five new CNG stations, increasing the total to 352 stations as of September 30, 2024.
- Mahanagar Gas Ltd reported a 13.07% increase in overall average gas sale volume compared to the previous year.
- The company achieved a consolidated total sales volume of 4.206 MMSCMD for the quarter.
- Mahanagar Gas Ltd has entered a joint venture to set up an E battery cell manufacturing facility in India, aiming for a 40% equity stake.
Negative Points
- The company's EBITDA decreased from INR 418 crore in the previous quarter to INR 399 crore in the current quarter.
- There is a concern about the rising cost of gas due to the reallocation of APM gas, which may impact margins.
- Operating expenses increased due to one-off items such as employee cost adjustments and repair maintenance.
- The company faces challenges in maintaining competitive pricing against liquid fuels due to potential increases in gas prices.
- The sudden reallocation of APM gas has led to uncertainties in gas sourcing and pricing strategies.
Q & A Highlights
Q: Can you explain the impact of the APM gas allocation reduction and how it affects your pricing strategy?
A: The reduction in APM gas allocation is a one-time adjustment by the government, and future reductions are expected to be gradual. New production from wells will be priced higher, but CGD will still receive priority. We are working on optimizing costs through long-term gas sourcing strategies and maintaining competitive pricing against alternative fuels.
Q: What is driving the strong volume growth in both CNG and industrial segments?
A: The growth is driven by adding large volume customers in industrial segments and launching CNG schemes. Our competitive pricing compared to petrol and diesel has also contributed. We expect to maintain a growth rate of 7-8% by year-end, with industrial and commercial segments growing in double digits.
Q: How do you plan to manage margins given the rising gas prices and competition with liquid fuels?
A: We aim to maintain an EBITDA margin of INR 10 to 12 per SCM. We are focusing on procurement efficiencies and operational improvements. Our pricing strategy will consider market conditions, and we are prepared to adjust as necessary to maintain competitiveness.
Q: What are the implications of the recent end of exclusivity notices by PNGRB for Mahanagar Gas?
A: The matter is sub judice, and any action will be subject to court approval. We view exclusivity as beneficial for the sector and are prepared to operate in a competitive environment. We will continue to focus on expanding our market presence.
Q: Can you provide details on your investment in the International Battery Company and its expected impact?
A: We are investing in a joint venture to set up a battery cell manufacturing facility in India, with an initial capacity of one gigawatt. This aligns with our strategy to diversify into non-fossil fuel segments. The project is expected to generate significant revenue and profitability once fully operational.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
