Accumulate Petronet LNG; target of Rs 180: Emkay

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Accumulate Petronet LNG; target of Rs 180: Emkay

Emkay Global Financial Services is bullish on Petronet LNG and has recommended accumulate rating on the stock with a target price of Rs 180 in its January 30, 2012 research report.

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Emkay Global Financial Services is bullish on Petronet LNG and has recommended accumulate rating on the stock with a target price of Rs 180, in its January 30, 2012 research report.

"Petronet LNG, results were above our and street estimates at bottom line, mainly due to higher volume growth of 7.3% to 144.9tbtu during the quarter. EBIDTA margin declined marginally by 157bps YoY to 7.9% (-40.4bps QoQ), mainly on account of higher input cost and increase in other expenditure. Company is planning to setup 3rd LNG terminal at Gangavaram port, Andhra Pradesh, with the total capacity of 5mntpa, While Kochi terminal will start from end of CY12. The recent news on proposed cap on gas marketing margin which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges."

"Petronet LNG reported results which were above our and street expectation. Revenue for the quarter was at Rs.63bn, growth of 18% QoQ, mainly due to higher offtake of both firm and spot volumes. EBITDA during the quarter was at Rs.5bn, growth of 12.2%, QoQ. EBIDTA margin declined marginally by 40bps QoQ to 7.9% (157.7bps YoY). During the quarter the company reported net profit of Rs2.9.bn, growth of 13.5% on QoQ basis. Revenue has increased by 18% QoQ from Rs.53bn in Q2FY12 to Rs.63bn in Q3 FY12, due to higher growth of both firm (~98tbtu) and spot (~25.2tbtu) volume and higher regasification charges drives the revenue and profitability. During the quarter overall volumes (Firm + Spot + Regasification) have increased by 7.3% 144.93tbtu (+21% YoY), mainly on account of short fall of domestic gas source (KG D6 + PMT). We expect volume would further increase in the future as domestic natural gas supply continues to fall short to meet the growing demand."

"EBIDTA margin declined marginally by 40bps QoQ to 7.9% (-157bps YoY), due to higher input cost and other expenditure during the quarter. Marketing margin for the quarter stood at ~$0.8/mmbtu, growth 29% QoQ. First time in a history company has achieved 115% capacity utilization during the quarter. As per the management capacity utilization will improve further from current level. We expect 110% (11mtpa) capacity utilization for FY12E and 114% (11.4mtpa) for FY13E."

"Dec11 Qtr results were above our and market expectations mainly supported by higher volume growth on sequential basis. Our revised EPS estimate of Rs14.4 and Rs14.5 for FY12E and FY13E respectively, imply earning CAGR of 32.4% over FY11-13E. However the recent news on proposed cap on gas marketing margin which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges. Currently, stock trades at 11.3x FY13E EPS and 2.7.x P/BV. Based on the recent run up in the stock price we changed our rating from Buy to Accumulate looking at the limited upside from current level. Also revised our TP upward to Rs.180. (Rs.170 earlier)," says Emkay Global Financial Services research report.

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