Hold Petronet LNG; target of Rs 167: Sushil Finance

Sushil Finance has recommended hold rating on Petronet LNG with a target of Rs 167, in its August 07, 2010 research report.

“Petronet LNG Ltd. (PLL) has reported decent set of numbers for the quarter ended June’12 which was slightly above our expectations. Revenues & PAT grew by ~10% QoQ to Rs.70,304 mn & Rs.2,708 mn respectively.”

“Revenues grew by ~10% sequentially from Rs.63,754 mn in Q4FY12 to Rs.70,304 mn in Q1FY13 whereas volumes declined by ~6% QoQ to 127 Tbtu’s. Volume dip was majorly on account of major maintenance shutdown of 5 fertilizer plants in April resulting into lower volume offtake. Despite lower volumes in April, the Company was successful in achieving 100% utilization in Q1FY13 signifying the volume pick-up from May onwards. Management anticipates strong demand for gas to continue on back of lower domestic gas supplies & fall in spot prices ($11-12/mmbtu). Higher marketing margins coupled with lower operating cost led to Operating profit growth of ~8% QoQ to Rs.4571 mn in Q1FY13, whereas margins remained flat at 6.5%. Lower operating cost was mainly on account of lower charter charges, since one of its ship carriers went for the planned dry docking for a month resulting into cost savings to the tune of ~Rs.180-200 mn. Net profit for Q1FY13 grew by ~10% QoQ from Rs.2451 mn to Rs.2708 mn whereas margins remained flat at 3.9%. EPS for Q1FY13 stood at Rs.3.6 v/s Rs.3.3 in Q4FY12.”

“Petronet LNG, being the largest established player, is well placed to capture the huge opportunity in the LNG space which has emerged due to strong domestic gas demand. Aggressive capex plan (10 to 17.5 MMTPA) to meet the increasing gas demand is likely to result in strong volume growth over the next few years. Also, strong parental support coupled with capital cost advantage at Dahej provides competitive edge over its peers. Healthy balance-sheet along with strong operating cash-flows not only provides better financial stability but would also aid huge expansion plan in future. At the CMP of Rs.149, the stock is quoting at 10.6x and 2.2x its FY14E EPS & BV of Rs.14.1 and Rs.67.6 respectively. Hence, considering the sound business model, huge capacity expansion coupled with strong financials, we maintain our positive outlook on the stock & recommend ‘HOLD’ with a DCF based price target of Rs.167,” says Sushil Finance research report.  

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