Buy Petronet LNG; target of Rs 190: KRChoksey

KRChoksey is bullish on Petronet LNG and has recommended buy rating on the stock with a target of Rs 190 in its July 3, 2012 research report.

“Petronet LNG, PLL’s operable capacity is likely to catapult from the current 10 mmtpa to 17.5 mmtpa, Two expansion projects- Kochi (5mmtpa) and Dahej (2.5mmtpa), are progressing well. PLNG expects the Kochi terminal to commence operations in Q3FY13 and the Dahej expansion is set for completion by FY14. PLNG has partly tied up gas for Kochi terminal (@1.5mmtpa). LNG import volumes will grow faster; volumes are set to cross 13.8 mmtpa by FY14E as GAIL completes new pipelines under construction and PLNG inks long-term sourcing contract for its Kochi LNG facility.”

Petronet leading from the front. We expect Petronet to largely fill the demand-supply gap. PLNG will be the key beneficiary of the rising gas demand-supply gap in India. While gas demand is expected to register a 9% CAGR in the next two years, we estimate domestic gas production to decline by 3% during this period. The gas supply deficit is thus expected to increase from 106mmscmd in FY12 to 154mmscmd in FY14, thereby increasing the demand for imported LNG. PNGRB Act does not bestow any powers to PNGRB to regulate either the marketing margin or the final selling price of natural gas. Latest media reports indicated, PNGRB has requested to Govt. to amend act. This implies that the Government will have to first notify the powers of PNGRB to regulate marketing margins, which will at least delay or, in the best-case scenario for gas marketers, prevent the regulation of marketing margins. Additional clarity on the timeline (Delhi HC in favour of IGL) and off take for the 5mmtpa capacity addition at Dahej , the proposed 5mmtpa East Coast terminal at Gangavaram and more term import contracts are potential catalysts,” says KRChoksey research report. 

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