Hello Sir,
Hope you are doing well.
While everyone has been talking about the EV space and looking for investment opportunities, did you know, major underlying shifts are happening in the CNG segment and massive growth is expected over the next 8-10 years.
In this email, we will share you few key insights regarding the changes happening in the CNG space.
Also, recently we shared a new stock recommendation with our Premium Members which could benefit from the massive growth expected in the CNG segment. You can read about the company HERE
So, what developments are taking place in the Natural Gas space?
The present share of gas in the energy basket of the country is more than 6%, and the target is to take it to 15% by 2030.
City Gas distribution (CGD) uses 22% of natural gas in the country, and is the second-largest gas consuming category followed by fertiliser.
The CGD sector receives cheaper domestic gas under administered price mechanism for the domestic piped natural gas (PNG) and compressed natural gas (CNG) categories.
The CNG segment comprises around 40% of consumption in CGD. As on November 2021-end, there were 83.7 lakh domestic PNG connections and 3,532 CNG stations across the country.
The above figures of PNG connections and CNG stations are set to change massively as the 9th, 10th and 11th round of auctions for City Gas Distribution (CGD) geographical areas have been a great success.
Source: Everest Kanto’s Feb’22 presentation
With the 9th, 10th and 11th round of CGD auctions, the population coverage is expected to increase from 20% (before Apr’18) to 96% and area under coverage from 11% to 86%.
Similarly, the CNG gas stations roll-out is also expected to grow from 3,094 at the end of Mar’21 to 10,000-11,000 stations by Mar’30.
On the back of expanding network of CNG gas stations and rising fuel cost, the demand for CNG fuelled vehicles is also expected to rise.
We all have been hearing about declining or tepid 4-wheeler sales since 2019; however, did you know that the CNG vehicle sales are rising at a brisk pace.
CNG car sales shot up to 2,25,196 units in CY 2021 and recorded its best yearly volume yet. Maruti CNG models contributed to over 83% of CNG cars sales in India.
Source: Autopunditz
Source: Statista
Do note that only 2 OEMs (Maruti and Hyundai) had CNG offerings in 2021. However; Tata jumped the CNG bandwagon too and dispatched 206 units at the end of 2021 to its dealerships.
Source: Everest Kanto’s Feb’22 presentation
It is believed that the overall population of CNG fuelled vehicles in India will rise from 35 lakh in Mar’20 to around 1 crore by Mar’30.
A lot of the above numbers are projections; however, the progress till now has been very encouraging and thus it makes sense to look at stock ideas that can benefit from CNG infrastructure expansion in India.
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