The ongoing sharp worth hikes taken by CGD corporations hold us snug on the close to time period margin outlook regardless of the sharp rise in home APM gasoline price in Apr-22. But pricing momentum must be sustained particularly given one other sharp rise forward in Oct-22E and a delay in resolving the APM allocation shortfall challenge. Maintain Buy on IGL, GUJGA and MAHGL. IGL stays our most popular choose whereas we notice a softer near-term outlook for GUJGA.
APM rose sharply in April: APM gasoline price rose from $2.9 to $6.1/mmbtu in Apr whereas one other sharp rise to $9.2/mmbtu GCV is probably going in Oct pushed by the spike in European gasoline costs. Meanwhile, a possible decision of APM gasoline allocation shortfall would even be carefully watched.
Initiative taken by IGL in worth hikes: IGL has raised CNG costs by Rs 9/kg since 1st Apr taking the cumulative hike since Jan to Rs 16/kg (costs had been hiked by one other Rs 2.5/kg with impact from Thursday). Our evaluation means that IGL is baking in a 7.5% shortfall at $6.1 APM. This provides us consolation on the close to time period margin outlook for IGL whereas the low cost for CNG vis-a-vis petrol/diesel stays enticing at 59%/47% helped by greater crude.
As for MAHGL, an entire VAT discount pass-through adopted by a Rs 7/kg hike makes efficient hike since thirty first Mar at Rs 1/kg (agency raised costs by one other Rs 5/kg with impact from Wednesday) which solely bakes in an entire APM allocation at $6.1/mmbtu. The low cost for CNG vis-a-vis petrol/diesel stands at a steep 61%/46% at the moment leaving important room for additional probably hikes.
Sharp worth hikes by GUJGA too however industrial section issues extra: The sharp worth hikes taken by GUJGA in CNG already seem to think about ~ 15% APM gasoline shortfall at $6.1/mmbtu GCV. But the close to time period outlook seems to be comfortable with elevated Spot LNG costs prompting GUJGA to maintain Morbi volumes (~ 60% of regular state volumes) at 40% beneath previous peaks. A delayed restoration in volumes coupled with a lower in margins led to our current 30% lower in FY23e EPS. Even so, the long run outlook seems resilient for the corporate.
Source: www.financialexpress.com”