Commenting on the Delhi government’s recent iteration of the odd-even rule, in which CNG-driven vehicles are likely to be exempt, analysts at Jefferies said it bodes well for CNG conversions among private vehicles (where penetration is 20-25 per cent).
The brokerage has factored in 12 per cent volume growth annually, over FY19-22, for IGL (the Delhi-NCR player) and says its earnings could grow at a similar rate given the management’s strategy on maintaining margins. IGL’s volume growth will also be driven by expansion to Gurugram, other parts of Haryana, and in newly won license areas.
and MGL, too, are expected to benefit from expansion in Gujarat and Maharashtra, respectively. Gujarat Gas
has high exposure to industrial customers, and the pollution control ban on coal gasifiers in Morbi cluster has propelled natural gas demand.
During the June quarter, the firm had seen volumes grow 42 per cent year-on year. Falling gas prices, too, bode well for profitability. For Gujarat Gas, analysts at Centrum Broking said overall volumes could grow above 2x by FY25. While considering current volume growth and a steady expansion in margins, they estimate earnings to grow 42 per cent annually over the next two years.
For MGL, expanding operations in Mumbai and Raigad district will drive volumes, profits are seen growing 11 per cent annually, show analyst estimates.
The overhang of Shell India’s stake sale is now behind (completed in August) for the stock, which, at about 12.5x its FY20 estimated earnings, is trading at a discount to Gujarat Gas
and IGL, which are trading at 15.4x to 20x their FY20 earnings estimates.