Accumulate Petronet LNG; target Rs 180: PINC Research

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Accumulate Petronet LNG; target Rs 180: PINC Research

PINC Research is bullish on Petronet LNG (PLL) and has recommended accumulate rating on the stock with a target price of Rs 180 in its January 27, 2012 research report.

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PINC Research is bullish on Petronet LNG (PLL) and has recommended accumulate rating on the stock with a target price of Rs 180 in its January 27, 2012 research report.

"Petronet LNG's (PLL) Q3FY12 results were above our and street expectations as volume grew by 21%YoY and 7.3%QoQ to 144.9tbtu led by very high capacity utilisation of 113% (Q2FY12-106%, Q1FY12-104%). This coupled with high LNG prices (pass-through) drove net sales up by 74%YoY and 18%QoQ to Rs 62.6bn. EBITDA margin expanded by 4.6%QoQ to Rs 34.7/mmbtu driven by strong margins on spot cargoes. As a result, net profit increased to Rs 2.95bn (+73%YoY, +13.5%QoQ) against our estimate of Rs 2.5bn.  PLL had volume of 2.8mmt resulting in highest ever capacity utilisation of ~113%. The company had a volume of 145tbtu out of which 98tbtu was long-term and 25tbtu was spot and remaining 22tbtu was re-gas volume for GAIL/GSPL which implies a run-rate of >11mmt of volumes on an annualised basis. Management remains confident of achieving similar utilisation in the future."

"PLL has charged strong marketing margin on spot volume (~USD1.1/mmbtu vs ~USD0.9/mmbtu in Q2FY12) over and above re-gas margin which shows their strength in maintaining the margin despite rising LNG prices and rupee depreciation. With PLNG already running at full capacity (utilisation of 104%/106%/113% in 1Q/2Q/3Q), it will not be an immediate beneficiary of fall in spot LNG prices from ~USD16.5/mmbtu to ~USD13/mmbtu and rupee appreciation given negligible room for further volume expansion in FY13. On the bright side, price correction should make LNG competitive with other fuels. Government has entrusted PNGRB to regulate marketing margins. We note that PLNG's earnings in the recent quarters have been boosted by high margins charged on spot LNG. However, LNG importers like PLNG are virtually out of the regulator's control. Moreover, as natural gas is not notified and imported gas is market linked, these companies are under no obligation to give details of price/margin breakdown. Kochi terminal (Capex - Rs 42bn) is expected to be commissioned in Q3CY12 and Dahej second jetty (Capex - Rs 9bn) in Q3CY13 which limits it's volume growth for FY13."

"We have introduced FY14 estimates and increased our earning estimates for FY12 and FY13 by 8.4% and 3.1% respectively on the back of higher capacity utilisation and strong marketing margin. At the CMP of Rs 164, the stock is trading at P/E of 11.3x & 11.9x and EV/EBITDA of 10.3x and 9.6x respectively for FY12 and FY13. We are upgrading PLL to 'Accumulate' with an increased target price of Rs 180," says PINC Research report.

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To read the full report click on the attachment