City gas distributors have crashed 30% from peak and may slide further away

City gas distributors have crashed 30% from peak and may slide further away

Credit Suisse has downgraded Indraprastha Gas, Mahanagar Gas and Gujarat Gas.





Mumbai / April 29, 2022 / 10:35 AM IST





Shares of city gas distribution companies have plummeted more than 30 percent from recent highs as surging global natural gas prices compress margins. Yet, Credit Suisse believes there is room for some more pain.

“The stocks have fallen 30 percent from peak but are still factoring stable margins or expanding margins,” said Credit Suisse in a note on April 29.

The brokerage has downgraded its rating on Indraprastha Gas, Mahanagar Gas and Gujarat Gas as it expects no growth in earnings per share over the next two years and sees more than 20 percent downside to Street’s earnings estimate for the three companies.

Globally, natural gas prices have surged to record highs in Europe and the the US due to supply shortages and sanctions imposed on Russia following the country’s invasion of Ukraine in February.

Lack of investments in new oil fields has severely constrained natural gas capacity amid record demand from industry and consumers as the pandemic fades.

Credit Suisse believes that the structural changes in the Indian gas industry will result in perpetually lower margins for city gas distributors.

“Higher blending