The continued sharp worth hikes taken by CGD firms hold us snug on the close to time period margin outlook regardless of the sharp rise in home APM fuel price in Apr-22. However 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. Preserve Purchase on IGL, GUJGA and MAHGL. IGL stays our most well-liked choose whereas we notice a softer near-term outlook for GUJGA.
APM rose sharply in April: APM fuel 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 fuel costs. In the meantime, a possible decision of APM fuel 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 larger 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% presently leaving vital room for additional doubtless 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 fuel shortfall at $6.1/mmbtu GCV. However the close to time period outlook appears mushy with elevated Spot LNG costs prompting GUJGA to maintain Morbi volumes (~ 60% of regular state volumes) at 40% under previous peaks. A delayed restoration in volumes coupled with a reduce in margins led to our latest 30% reduce in FY23e EPS. Even so, the long term outlook seems resilient for the corporate.