Mahanagar Gas BUY RESULTS REVIEW 1QFY19 01 AUG Highlights of the quarter. CMP (as on 1 Aug 2018) Rs 947 Target Price Rs 1,292

Similar documents
Discounting $45/bbl of realisation

Healty cigarette-driven growth

Jubilant FoodWorks NEUTRAL RESULTS REVIEW 4QFY17 30 MAY Highlights of the quarter

Crompton Greaves Consumer Electricals

BLS International Services

PI Industries BUY RESULTS REVIEW 1QFY19 07 AUG Highlights of the quarter

Jubilant FoodWorks BUY RESULTS REVIEW 1QFY18 18 JULY Highlights of the quarter

Crompton Greaves Consumer Electricals

Hindustan Petroleum Corporation

Hindustan Petroleum Corporation

Near-term pressure, but long-term outlook positive

Multi Commodity Exchange

Neuland Labs BUY RESULTS REVIEW 1QFY19 12 AUG 2018

Navin Fluorine International

BHEL SELL RESULTS REVIEW 1QFY15 13 AUG CMP (as on 12 Aug 2014) Rs 224 Target Price Rs 188

Intellect Design Arena

J. Kumar Infraprojects

Ahluwalia Contracts. Cautious optimism BUY RESULTS REVIEW 4QFY17 31 MAY Highlights of the quarter

Bharat Petroleum Corporation

Gulf Oil Lubricants BUY RESULTS REVIEW 1QFY19 09 AUG Key highlights

Vinati Organics BUY RESULTS REVIEW 2QFY19 29 OCT INDUSTRY CHEMICALS CMP (as on 29 Oct 2018) Rs 1,408 Target Price Rs 1,700

NRB Bearings. Strong Show BUY RESULTS REVIEW 4QFY18 23 MAY Highlights of the quarter

Marico Kaya BUY RESULTS REVIEW 4QFY15 29 APR 2015

Reliance Industries. Timing is everything BUY COMPANY UPDATE 1 OCT 2014

Hindustan Unilever BUY RESULTS REVIEW 4QFY17 18 MAY 2017

Torrent Pharma BUY RESULTS REVIEW 1QFY18 01 AUG 2017

Sun Pharma BUY RESULTS REVIEW 1QFY19 16 AUG 2018

Central Depository Services

Agrochemicals. 3QFY18E Results Preview 09 JAN Basanth Patil

Capital Goods. 3QFY18E Results Preview. 10 Jan Sujit Jain

Central Depository Services

Navin Fluorine International

Music Broadcast. In-line but muted BUY RESULTS REVIEW 2QFY19 26 OCT Key highlights. CMP (as on 26 Oct 2018) Rs 328 Target Price Rs 387

Alkem Labs BUY RESULTS REVIEW 1QFY19 11 AUG story remains on-track. Maintain BUY with a revised TP of Rs 2,410 (24x FY20E EPS).

Maruti Suzuki. A Trough Quarter BUY RESULTS REVIEW 3QFY19 25 JAN CMP(as on 25 Jan 2019) Rs 6,516 Target Price Rs 7,400

Real Estate. 3QFY19E Results Preview. 11 Jan Parikshit D Kandpal, CFA

Carborundum Universal

Central Depository Services

Kalpataru Power Transmission

Oil & Gas. 4QFY17E Results Preview. 13 Apr Deepak Kolhe

Geared for version 3.0

Alkem Labs BUY RESULTS REVIEW 3QFY19 09 FEB CMP (as on 08 Feb 2019) Rs 1,904 Target Price Rs 2,340. Highlights of the quarter

Insecticides India BUY RESULTS REVIEW 4QFY17 30 MAY 2017

ICICI Prudential Life

Weak numbers in peak quarter

Strong volumes, offset by costs

Agriculture. 4QFY18E Results Preview 13 APR Madhukar Ladha

Max Financial. Improving margins! BUY RESULTS REVIEW 4QFY18 30 MAY Highlights of the quarter

Jubilant Life Sciences

Dishman Carbogen Amcis

Exide Industries BUY RESULTS REVIEW 4QFY18 08 MAY Highlights of the quarter. CMP (as on 08 May 2018) Rs 268 Target Price Rs 298

Ambuja Cement. Realisations-driven beat SELL RESULTS REVIEW 2QCY17 25 JUL Highlights of the quarter

Bajaj Auto BUY RESULTS REVIEW 1QFY18 21 JUL Highlights of the quarter

Coromandel International

Dilip Buildcon. Strong comeback BUY RESULT REVIEW 1QFY19 16 AUG Highlights of the quarter. CMP (as on 16 Aug 2018) Rs 847 Target Price Rs 1,434

Hero MotoCorp BUY RESULTS REVIEW 2QFY19 16 OCT CMP (as on 16 Oct 2018) Rs 2,898 Target Price Rs 3,602. Highlights of the quarter

J. Kumar Infraprojects

Tata Steel. JV comes to fruition BUY COMPANY UPDATE 21 SEP Other key highlights. CMP (as on 20 Sep 17) Rs 688 Target Price Rs 818

Bharti Infratel BUY RESULT REVIEW 3QFY19 25 JAN 2019

Dr. Reddy s Labs. Misery continues SELL RESULTS REVIEW 1QFY18 28 JUL 2017

NIIT Technologies. NEUTRAL Higher capex weighing on FCF RESULTS REVIEW 2QFY15 16 OCT 2014

Subros BUY RESULTS REVIEW 2QFY19 30 OCT CMP (as on 29 Oct 2018) Rs 268 TP Rs 435. Key highlights

Bajaj Auto NEUTRAL RESULTS REVIEW 2QFY16 23 OCT Key highlights. CMP (as on 23 Oct 2015) Rs 2,514 Target Price Rs 2,720

PSP Projects. Marginal miss BUY RESULTS REVIEW 1QFY19 10 AUG 2018

Crompton Greaves Consumer Electricals

Ambuja Cement. Weak numbers SELL RESULTS REVIEW 1QCY17 01 MAY 2017

Construction. 4QFY18E Results Preview 14 APR Parikshit D Kandpal

Pre-sales pickup key trigger

Suprajit Engineering. Synergies to accrue BUY COMPANY UPDATE 16 SEP 2016

Radico Khaitan BUY RESULTS REVIEW 3QFY19 24 JAN 2019

Real Estate. 4QFY17E Results Preview. 13 Apr Parikshit D Kandpal

Cyient. Good show, priced in NEUTRAL RESULTS REVIEW 4QFY17 21 APRIL Highlights of the quarter

JBM Auto. Ready to take off BUY RESULTS REVIEW 1QFY19 07 AUG Key highlights

ITC BUY RESULTS REVIEW 1QFY19 27 JUL 2018

Sonata Software. On growth path BUY RESULTS REVIEW 1QFY18 16 AUG Highlights of the quarter

Weak quarter but well placed

V-Guard BUY RESULTS REVIEW 3QFY19 02 FEB 2019

Multi Commodity Exchange

Bharat Forge. Cyclical headwinds persist but structural story intact BUY COMPANY UPDATE 9 DEC Key takeaways

Brigade Enterprises. Stable performance BUY RESULTS REVIEW 2QFY19 14 NOV 2018

Emami NEUTRAL RESULTS REVIEW 4QFY15 14 MAY 2015

Mphasis. Growth drivers intact BUY RESULTS REVIEW 3QFY19 25 JAN 2019

Margin boost through non-core book

Hexaware Technologies

Thangamayil BUY RESULTS REVIEW 2QFY19 15 NOV 2018

V-Guard. On track BUY COMPANY UPDATE 27 SEP 2017

Lupin BUY COMPANY UPDATE 12 SEP 2013

Outperformance continues

Coal India. Tough times BUY COMPANY UPDATE 22 AUG CMP (as on 21 Aug 17) Rs 238 Target Price Rs 300

Cement, Metals & Mining

Growth + cash flows = BUY

ITD Cementation (India) Ltd.

IRB Infrastructure Developers

Construction & Infra. 1QFY19E Results Preview 10 JUL Parikshit D Kandpal

Brigade Enterprises BUY RESULTS REVIEW 2QFY16 03 NOV Highlights of the quarter. CMP (as on 03 Nov 2015) Rs 162 Target Price Rs 210

FIRSTSOURCE SOLUTIONS LTD.

Chemicals and Fertilisers

Residential recovery awaited

Mindtree. Steady quarter, Upside capped NEUTRAL RESULTS REVIEW 4QFY19 18 APR INDUSTRY CMP (as on 16 Apr 2019) Rs 972 Target Price Rs 1,040

Reliance Industries NEUTRAL RESULTS REVIEW 4QFY17 25 APR Highlights of the quarter. CMP (as on 24 Apr 2017) Rs 1,414 Target Price Rs 1,375

Transcription:

INDUSTRY OIL & GAS CMP (as on 1 Aug 2018) Rs 947 Target Price Rs 1,292 Nifty 11,346 Sensex 37,522 KEY STOCK DATA Bloomberg MAHGL IN No. of Shares (mn) 99 MCap (Rs bn) / ($ mn) 94/1,367 6m avg traded value (Rs mn) 431 STOCK PERFORMANCE (%) 52 Week high / low Rs 1,378/772 3M 6M 12M Absolute (%) 6.5 (6.1) (4.9) Relative (%) (0.3) (10.6) (20.1) SHAREHOLDING PATTERN (%) Promoters 65.00 FIs & Local MFs 5.56 FPIs 9.68 Public & Others 19.76 Source : BSE Nilesh Ghuge nilesh.ghuge@hdfcsec.com +912261717342 Robust performance MGL s adjusted 1QFY19 revenue came in at Rs 6.32bn, up 19.1% YoY led by 12.9% YoY increase in volumes to 2.9mmscmd and higher realisations at Rs 24.2/scm (+6.4% YoY). The company has finalised the negotiations with OMCs with respect to trade discounts and accounted additional discount of Rs 129.3mn relating to period from Jan15 to Mar18. This has been netted off from revenue for this quarter. EBITDA stood at Rs 2.24bn up 10.1% YoY and 27.1% QoQ. Per unit EBITDA margin was down 1.6% YoY and up 22.4% QoQ to Rs 8.6/scm. APAT came in at Rs 1.37 bn (+10.1% YoY, +30.6% QoQ). Currently, CNG prices are 3545% discount to Diesel and Petrol respectively. This should provide an adequate cushion and pricing power to MGL to maintain its EBITDA margins above Rs 7/scm over FY1921E. Favourable economics will also accelerate conversion of private vehicles. It will allow the MGL to maintain its volume growth ~5% over FY1921E. In the 9th round of City Gas auctions, PNGRB has planned to roll out CGD network in 86 Geographical RESULTS REVIEW 1QFY19 01 AUG 2018 Mahanagar Gas BUY Areas (GAs), that is, more than double the existing authorised GAs. MGL has bid only for 3 GAs. But the choice of the GAs is well thought of as two (Chennai and Visakhapatnam) out of three GAs are high potential and densely populated among the total GAs offered. Our target is Rs 1,292/sh (27x Jun20E standalone EPS). Maintain BUY. Highlights of the quarter Total volumes were at 2.9mmscmd (+11.9% YoY, +3.8 QoQ). CNG volumes were at 2.1 (+12.6% YoY, +3.3% QoQ). PNG volumes were at 0.8 (+10% YoY, +1.1% QoQ). Price for industrial/commercial customers was up 27% YoY to Rs 35.3/31.11 per kg. Net realisation was Rs 24.2/scm (+146bps YoY, +87bps QoQ), whereas cost of gas was Rs 11.2/scm (+130bps YoY). Raw material cost was lower due to lower SPOT LNG prices. Nearterm outlook: Per unit margins will remain elevated owing to higher than required increase in CNG and PNG prices in 1QFY19. Financial Summary (Standalone) Year Ending March (Rs bn) 1QFY19 1QFY18 YoY Chg. 4QFY18 QoQ Chg FY18 FY19E FY21E Revenues 6.32 5.31 19.1 5.87 7.7 22.3 25.1 25.8 26.8 EBITDA 2.24 3 10.1 1.76 27.1 7.8 7.7 7.9 8.3 APAT 1.37 1.24 10.1 1.05 30.6 4.8 4.7 4.7 4.9 AEPS (Rs) 13.9 12.6 10.1 10.6 30.6 48.4 47.7 47.4 49.1 P/E (x) 19.5 20.4 19.9 19.2 EV/EBITDA (x) 11.0 10.9 10.5 9.8 RoE (%) 24.3 21.3 19.1 18.0 HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

Per unit raw material cost reduced owing to lower SPOT LNG prices The company has finalised the negotiations with OMCs with respect to trade discounts and accounted additional discount of Rs 129.3mn relating to period from Jan15 to Mar18. This has been netted off from revenue for this quarter The trade discount has been raised to Rs 5/kg from Rs 2.75/kg Sequentially, EBITDA margin was up owing to increase in prices for industrial and commercial segment and lower opex as there was annual maintenance in 4Q Quarterly Financials Snapshot (Rs. bn) 1QFY19 1QFY18 YoY Chg. (%) 4QFY18 QoQ Chg (%) Net Sales 6.32 5.31 19.1 5.87 7.7 Raw material and Traded Goods 2.93 2.31 26.7 2.91 0.5 Employee Expenses 0.17 0.17 3.3 0.16 4.8 Other Operating Expenses 0.99 0.79 24.9 1.03 4.6 EBITDA 2.24 3 10.1 1.76 27.1 Depreciation 0.30 0.25 19.8 0.34 13.1 EBIT 1.94 1.79 8.8 1.42 36.7 Other Income 0.15 0.12 27.7 0.17 11.6 Interest 0.00 0.00 20.0 0.00 166.7 PBT 1.97 1.90 3.3 1.60 23.3 Provision for tax 0.68 0.66 3.4 0.55 24.9 RPAT 1.28 1.24 3.2 1.05 22.5 Oneoffs (0.13) NA NA APAT 1.37 1.24 10.1 1.05 30.6 Margin Analysis 1QFY19 1QFY18 YoY (bps) 4QFY18 QoQ (bps) Raw material as % of Net Sales 46.3 43.6 278 49.6 (331) Employee Expenses as % of Net Sales 2.7 3.3 (62) 2.7 (7) Other Operating Expenses as % of Net Sales 15.6 14.9 72 17.6 (201) EBITDA Margin (%) 35.4 38.3 (288) 30.0 540 Net Profit Margin (%) 21.6 23.4 (177) 17.8 380 Tax Rate (%) 34.8 34.7 5 34.3 44 Page 2

The price hike taken on 1st April (to pass on domestic gas price increase) and on 9th June to pass on the impact of depreciation of rupee (~5.5% during the quarter), increase in proportion of costlier gas from PannaMukta and increase in OMC trade margin and CNG franchise dispensing charges is more than require. This has resulted in expansion in margins Change CNG and PNG volumes in the near term based on 1Q volumes and increase in discount to alternate fuels Quarterly Operational Data 1QFY19 1QFY18 YoY Chg. (%) 4QFY18 QoQ Chg (%) Total Sales Volumes (mmscm) 261.4 233.5 11.9 251.8 3.8 CNG 193.1 171.5 12.6 184.9 4.4 PNG 68.3 62.1 10.1 66.9 2.2 Total Volume (mmscmd) 2.9 2.6 11.9 2.8 2.7 CNG 2.1 1.9 12.6 2.1 3.3 PNG 0.8 0.7 10.1 0.7 1.1 Margins (Rs/scm) 1QFY19 1QFY18 YoY (bps) 4QFY18 QoQ (bps) Realisation 24.2 22.7 145.5 23.3 87.0 Gross Spread 13.0 12.8 15.4 11.7 124.3 Opex 4.4 4.1 29.0 4.7 (32.7) EBITDA Spreads 8.6 8.7 (13.6) 7.0 157.0 PAT 4.9 5.3 (41.4) 4.2 74.7 Change In Estimates FY19E Unit Old New Ch % Old New Ch % Volumes CNG mmscmd 9 2.11 0.7 2.16 2.20 1.8 PNG mmscmd 0.76 0.76 1.2 0.78 0.80 1.6 Exchange Rate Rs/USD 68.00 67.75 (0.4) 67.00 67.00 Revenues Rs bn 24.62 25.10 24.74 25.79 4.3 EBITDA Rs bn 7.39 7.66 3.7 7.51 7.86 4.6 APAT Rs bn 4.49 4.71 5.1 4.45 4.68 5.4 AEPS Rs/sh 45.43 47.73 5.1 45.01 47.42 5.4 Source: HDFC sec Inst Research Page 3

16,000 three wheelers added during the quarter compared to 2,800 in 1QFY18 Volume Trend mmscmd CNG PNG Total 3.5 2.5 2.4 2.5 2.5 2.6 2.6 2.6 2.7 2.7 2.8 2.9 3.0 2.6 2.5 1.5 1.0 0.5 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 Margin Trend Rs/scm Gross margin EBITDA margin PAT margin 1 1 10.0 8.0 6.0 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 Change per unit margin in the near term based on higher than required increase in CNG and PNG prices in 1Q. Assumptions FY17 FY18 FY19E FY21E Volumes 2.6 2.7 2.9 3.0 3.1 CNG 1.9 2.1 2.2 2.3 PNG 0.7 0.7 0.8 0.8 0.8 YoY growth of Total Volumes 5.7 5.1 6.3 4.4 Of CNG Volumes 5.5 4.5 6.2 4.5 Of PNG Volumes 6.3 7.1 6.6 4.1 Gross margin (Rs/scm) 10.7 12.2 11.7 11.7 11.8 EBITDA margin (Rs/scm) 6.7 7.9 7.3 7.2 7.3 PAT (Rs/scm) 4.2 4.8 4.3 4.3 4.3 Exchange Rate (Rs/USD) 66.9 67.0 67.8 67.0 67.0 Page 4

CNG Volumes Growth mmscmd CNG CNG YoY Gr (%) RHS % PNG Volumes Growth mmscmd PNG PNG YoY Gr (%) RHS % CNG volumes to grow by ~5% CAGR over FY1821E 2.50 0 1.50 1.00 0.50 0.00 1.90 3.2 1.98 4.5 2.11 6.2 2.20 4.5 2.29 7.0 6.0 5.0 3.0 1.0 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 7.1 0.67 0.72 6.3 0.76 6.6 0.80 0.83 4.1 8.0 7.0 6.0 5.0 3.0 1.0 FY17 FY18E FY19E FY21E FY17 FY18E FY19E FY21E Overall Volume Growth mmscmd Total Overall YoY Gr (%) RHS % EBITDA Margin Trend Rs/scm Overall volumes to grow by ~5% CAGR over FY1821E Per unit EBITDA margin to remain at Rs 7.3/scm over FY1921E 3.50 3.00 2.50 0 1.50 1.00 0.50 2.57 2.70 5.1 2.87 6.3 3.00 4.4 3.12 7.0 6.0 5.0 3.0 1.0 9.0 8.0 7.0 6.0 5.0 3.0 1.0 6.7 7.9 7.3 7.2 7.3 FY17 FY18E FY19E FY21E FY17 FY18E FY19E FY21E Page 5

SOTP Valuation EPS (Rs/sh) Multiple (x) Value Rs/sh Valuation Basis Standalone business 47.8 27 1,292 Value per share 1,292 Source: HDFC sec Inst Research P/E multiple on Peer Valuations Peer valuation MCap (Rs bn) CMP (Rs) RECO TP (Rs) Upside % EPS (Rs/sh) P/E (x) P/BV (x) ROE (%) FY18 FY19E FY21E FY18 FY19E FY21E FY18 FY19E FY21E FY18 FY19E FY21E Reliance Industries 7,070 1,116 BUY 1,200 8 55.9 73.1 80.2 86.2 20.0 15.3 13.9 13.0 2.2 1.8 1.6 11.8 13.9 13.5 13.0 ONGC 2,053 160 BUY 275 72 15.5 21.1 22.5 22.8 10.3 7.6 7.1 7.0 1.1 1.0 0.9 0.9 10.5 13.6 13.5 12.9 Indian Oil Corp 1,507 159 BUY 228 43 22.5 23.0 24.5 26.9 7.1 6.9 6.5 5.9 1.5 1.3 1.2 1.1 20.3 18.7 17.9 17.6 BPCL 767 384 BUY 581 51 39.7 43.2 45.9 49.8 9.7 8.9 8.4 7.7 2.2 1.9 1.7 1.4 24.8 23.3 21.5 20.3 HPCL 421 276 BUY 463 68 41.7 31.9 30.7 33.3 6.6 8.7 9.0 8.3 1.8 1.6 1.4 1.3 28.7 19.0 16.4 15.9 Petronet LNG 347 231 BUY 316 37 13.9 13.5 16.8 19.9 16.7 17.2 13.8 11.6 3.6 3.2 2.7 2.3 23.3 19.6 21.4 21.7 GAIL 819 363 BUY 360 (1) 20.4 23.2 24.6 27.0 17.8 15.7 14.7 13.5 1.9 1.7 1.6 11.7 12.5 12.2 12.4 Oil India 235 207 BUY 338 63 23.5 30.6 32.5 33.3 8.8 6.8 6.4 6.2 0.8 0.7 0.7 0.6 9.4 11.7 11.1 10.2 Indraprastha Gas 207 295 BUY 427 45 9.6 11.3 13.1 13.4 30.8 26.2 22.5 2 5.9 5.1 4.5 3.9 20.9 20.9 21.2 19.1 Mahanagar Gas 94 947 BUY 1,292 36 48.4 47.7 47.4 49.1 19.5 20.4 19.9 19.2 4.5 3.6 3.3 24.3 21.3 19.1 19.2 Asian Oil Field Services* 4 94 NA 168 79 5.4 13.9 16.8 16.7 17.3 6.8 5.6 5.6 3.3 2.4 1.8 1.4 23.7 31.7 28.3 2, * Fair Price Page 6

Standalone Income Statement (March ending) (Rs bn) FY17 FY18 FY19E FY21E Revenues 20.34 22.33 25.10 25.79 26.84 Growth % (2.2) 9.8 12.4 2.8 4.1 Raw Material 10.18 10.29 12.72 12.98 13.44 Employee Cost 0.60 0.67 0.69 0.72 0.76 Other Expenses 3.11 3.56 3 4.24 4.36 EBITDA 6.44 7.81 7.66 7.86 8.28 EBIDTA Margin (%) 31.7 35.0 30.5 30.5 30.8 EBITDA Growth % 25.6 21.2 (1.8) 2.5 5.4 Depreciation 0.95 1.11 1.22 1.42 1.63 EBIT 5.49 6.69 6.45 6.43 6.65 Other Income (Including EO Items) 0.53 0.57 0.50 0.66 0.69 Interest 0.01 0.00 0.00 0.00 0.00 PBT 6.01 7.27 6.94 7.09 7.34 Tax 7 2.49 2.36 2.41 2.49 RPAT 3.93 4.78 4.58 4.68 4.85 EO (Loss) / Profit (Net Of Tax) (0.13) APAT 3.93 4.78 4.71 4.68 4.85 APAT Growth (%) 27.5 21.5 (1.3) (0.6) 3.6 AEPS 39.8 48.4 47.7 47.4 49.1 Standalone Balance Sheet (Rs bn) FY17 FY18P FY19E FY21E SOURCES OF FUNDS Share Capital 0.99 0.99 0.99 0.99 0.99 Reserves And Surplus 17.41 19.97 22.29 24.72 27.31 Total Equity 18.40 20.95 23.28 25.71 28.30 Longterm Debt 0.03 0.01 0.01 0.01 0.01 Shortterm Debt Total Debt 0.03 0.01 0.01 0.01 0.01 Deferred Tax Liability 1.38 1.75 1.75 1.75 1.75 Longterm Provision 0.14 0.16 0.16 0.16 0.16 TOTAL SOURCES OF FUNDS 19.95 22.87 25.20 27.62 30.21 APPLICATION OF FUNDS Net Block 13.05 15.32 16.84 18.41 19.77 Capital WIP 4.12 3.57 3.57 3.57 3.57 LT Loans And Advances 1.12 1.46 1.46 1.46 1.46 Total Noncurrent Investments Inventories 0.24 0.24 0.30 0.30 0.31 Debtors 0.95 0.91 1.03 1.06 1.10 Cash and Cash Equivalents 6.15 7.80 10.02 11.01 12.47 Other Current Assets 0.63 0.81 0.91 0.93 0.97 Total Current Assets 7.96 9.76 12.25 13.29 14.85 Creditors 1.49 1.10 1.36 1.39 1.44 Other Current Liabilities & Provns 4.81 6.13 7.57 7.72 7.99 Total Current Liabilities 6.30 7.23 8.93 9.11 9.43 Net Current Assets 1.67 2.52 3.33 4.19 5.42 TOTAL APPLICATION OF FUNDS 19.95 22.87 25.20 27.62 30.21 Page 7

Standalone Cash Flow Rs bn FY17 FY18P FY19E FY21E Reported PBT 6.01 7.27 6.94 7.09 7.34 Nonoperating & EO Items (0.53) (0.57) (0.63) (0.66) (0.69) Interest Expenses 0.01 0.00 0.00 0.00 0.00 Depreciation 0.95 1.11 1.22 1.42 1.63 Working Capital Change 0.80 0.94 1.42 0.12 0.23 Tax Paid (1.90) (2.11) (2.36) (2.41) (2.49) OPERATING CASH FLOW ( a ) 5.34 6.64 6.60 5.57 6.02 Capex (2.54) (2.83) (2.74) (2.99) (2.99) Free Cash Flow (FCF) 2.81 3.80 3.86 2.58 3.03 Investments (0.02) (0.49) Nonoperating Income 0.53 0.57 0.63 0.66 0.69 Others INVESTING CASH FLOW ( b ) (3) (2.75) (2.11) (2.33) (2.29) Debt Issuance/(Repaid) (0.67) 0.02 0.00 Interest Expenses (0.01) (0.00) (0.00) (0.00) (0.00) FCFE 2.12 3.82 3.86 2.58 3.03 Share Capital Issuance 0.09 Dividend (2.26) (2.26) (2.26) (2.26) (2.26) FINANCING CASH FLOW ( c ) (2.85) (2.24) (2.26) (2.26) (2.26) NET CASH FLOW (a+b+c) 0.46 1.65 2.23 0.98 1.46 EO Items, Others Closing Cash & Equivalents 6.15 7.80 10.03 11.01 12.47 Standalone Key Ratios FY17 FY18P FY19E FY21E PROFITABILITY % EBITDA Margin 31.7 35.0 30.5 30.5 30.8 EBIT Margin 27.0 30.0 25.7 24.9 24.8 APAT Margin 19.3 21.4 18.8 18.2 18.1 RoE 22.1 24.3 21.3 19.1 18.0 Core RoCE 24.2 25.4 21.2 19.9 19.2 RoCE 20.4 22.3 19.1 17.7 16.8 EFFICIENCY Tax Rate % 34.5 34.2 3 33.9 33.9 Fixed Asset Turnover (x) 0.8 0.8 0.8 0.7 0.7 Inventory (days) 4 4 4 4 4 Debtors (days) 17 15 15 15 15 Other Current Assets (days) 11 13 13 13 13 Payables (days) 27 18 20 20 20 Other Current Liab & Provns (days) 86 100 110 109 109 Cash Conversion Cycle (days) (80) (86) (97) (96) (96) Net Debt/EBITDA (x) (1.0) (1.0) (1.3) (1.4) (1.5) Net D/E (0.3) (0.4) (0.4) (0.4) (0.4) Interest Coverage 0.0 0.0 0.0 0.0 0.0 PER SHARE DATA (Rs) EPS 39.8 48.4 46.4 47.4 49.1 CEPS 49.5 59.6 58.7 61.8 65.6 Dividend 19.0 19.0 19.0 19.0 19.0 Book Value 186.3 212.1 235.7 260.2 286.5 VALUATION P/E (x) 23.7 19.5 20.4 19.9 19.2 P/Cash EPS (x) 19.1 15.8 16.1 15.3 14.4 P/BV (x) 5.1 4.5 3.6 3.3 EV/EBITDA (x) 13.5 11.0 10.9 10.5 9.8 EV/Revenue (x) 4.3 3.8 3.3 3.2 3.0 Dividend Yield (%) OCF/EV (%) 6.1 7.8 7.9 6.8 7.4 FCFF/EV (%) 3.2 4.4 4.6 3.1 3.7 FCFE/M Cap (%) 2.3 4.1 4.1 2.8 3.2 Page 8

RECOMMENDATION HISTORY Mahanagar Gas 1,300 1,200 1,100 1,000 900 800 TP Date CMP Reco Target 28Dec17 1,097 NEU 1,211 11Jan18 1,097 NEU 1,209 12Feb18 1,030 NEU 1,240 12Apr18 914 NEU 1,263 22May18 790 BUY 1,259 9Jul18 814 BUY 1,215 1Aug18 947 BUY 1,292 Rating Definitions 700 Aug17 Sep17 Oct17 Nov17 Dec17 Jan18 Feb18 Mar18 Apr18 May18 Jun18 Jul18 Aug18 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver ()10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than ()10% returns over the next 12 month period Page 9

Disclosure: I, Nilesh Ghuge, MMS, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes without prior written approval of HSL. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or comanaged public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or comanaging public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSEINB/F/E 231109431, BSEINB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. No.: INH000002475, CIN U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing. Page 10

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai 400 013 Board: +91226171 7330 www.hdfcsec.com Page 11