Buy Petronet LNG; target of Rs 390: Motilal Oswal

Motilal Oswal's research report on Petronet LNG

PLNG’s 2QFY26 revenue/EBITDA came in line with our estimate at INR110b/11.2b. The company booked additional provisions of INR1.3b against UoP dues during the quarter. UoP trade receivables of INR289m were waived off during 2Q. EBITDA adjusted for UoP provisioning and waiver stood 10% above our estimate. Reported PAT was in line at INR8.1b, aided by higher-than-expected other income. Total volumes came in line with our estimate at 228tbtu. Dahej utilization was in line with our estimates, while Kochi utilization stood 12% above est. We note that spot LNG prices dipped QoQ in 2Q, averaging USD11.8/mmbtu (USD12.4 in 1Q).

Outlook

Our DCF-based TP of INR390 (WACC: 10.5%, TG = 2%) assumes a 10% tariff cut in FY28, followed by a 4% rise for both the terminals. While we have incorporated the full capex for the petchem plant, we value it conservatively at 0.5x FY29E P/B and discount this back to FY27.