Sell Petronet LNG; target of Rs 250: ICICI Securities

ICICI Securities research report on Petronet LNG

Petronet LNG (PLNG) reported 16%/13% YoY/QoQ increase in adj. EBITDA to INR 12.8bn and +21%/+19% YoY/QoQ change in adj. PAT to INR 8.9bn. Reported PAT was INR 10.7bn with an INR 2.3bn reversal of UoP provision. Volume of 189tbtu at Dahej was 30 tbtu/24tbtu lower QoQ/YoY. Gross margin of INR 8.9bn was up 9% QoQ. Moderate LNG prices, expansion at Dahej by 5mt by H1FY26 and the completion of the Kochi-Bengaluru pipeline by CY25 should bode well for PLNG, but may be offset by: 1) lack of clarity on offtake contracts for the 5mt expansion planned by H1FY26E; 2) growing competition from competing terminals, including Dahej; 3) aggressive capex planned for the INR 200bn petchem plant and INR 50bn Gopalpur terminal, which would dent return ratios. Retain SELL; TP revised to INR 250.

Outlook

Moreover, valuations of 10.6x FY27E PER (above 5-year average) and 2x P/BV (below 5-year average) appear like a risky bet on diversification at a scale at which PLNG has not operated before. Maintain SELL.