City gas volumes crawl even as price worries loom

livemint.com:

Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL) and Gujarat Gas Ltd have seen their stock prices decline 4-11% in August after the June quarter earnings failed to lift investor confidence. Their lower-than-expected volumes reported during Q1 dampened sentiments and analysts are watchful after slight rise in spot gas prices. Earnings of CGD companies in Q1 were a mixed bag.

While IGL and MGL saw a sequential margin improvement, Gujarat Gas saw a decline. MGL’s Ebitda per standard cubic meter (scm) of gas at ₹16.80 improved from ₹9.10 in the year ago quarter, and ₹12.80 in the previous quarter. IGL Ebitda per scm, at ₹8.60 also improved from ₹6.30 in the previous quarter, but remained flat on a year-on-year (y-o-y) basis.

However, Gujarat Gas’s Ebitda per scm at ₹4.60 was lower than ₹6.80 in the year-ago quarter, and ₹7.00 in the previous quarter. Analysts at Anand Rathi research said Gujarat Gas’s gross margin fell sequentially as prices were cut at Morbi (industrial cluster in Gujarat) to compete with propane. The fall in propane prices had meant some industrial gas customers switched away from piped natural gas usage to propane.

The rising propane prices and declining spot LNG prices are expected to help Gujarat Gas in subsequent quarters. To be sure, spot LNG prices should not rise significantly from hereon. A bigger disappointment came in volumes, said analysts.

Abhijit Bora, senior analyst at Sharekhan, said CGD players like MGL and IGL saw strong margin recovery, but gas sales volume growth was subdued and missed estimates. MGL’s total gas sales volume was at 3.4 mmscmd (million metric standard cubic metres per day) and remained flat on a sequential as well as y-o-y basis. IGL gas sales volumes at 8.20 mmscmd