Buy Petronet LNG; target Rs 197: FinQuest Securities
FinQuest Securities is bullish on Petronet LNG (PLNG) and has recommended buy rating on the stock with a target price of Rs 197 in its January 16, 2013 research report.
January 17, 2013 / 11:22 IST
FinQuest Securities is bullish on Petronet LNG (PLNG) and has recommended buy rating on the stock with a target price of Rs 197 in its January 16, 2013 research report.
"Petronet LNG, in the quarter, sales increased 33.1% Y-o-Y and 11.6% sequentially to Rs. 84.2 bn with sequential increase driven by the increase in LNG prices and volumes. The PAT increased 7.9% Y-o-Y and 1.2% sequentially to Rs. 3.19 bn, ahead of our estimates of Rs. 2.75 bn, on account of higher than expected regassification volumes and marketing margins. In Q3FY13, the company regassified 141.5 TBTU of LNG, down 2.4% Y-o-Y, however, it grew 4.8% sequentially; ahead of our estimated volumes of 138.4 TBTU. In the quarter, PLNG capacity utilization rose to ~110% up from ~105% in Q2FY13 and ~113% in Q3FY12. Gross margins increased 9.2% Y-o-Y but declined 4.0% sequentially to Rs. 43.9 per mmbtu In the quarter, the gross margins increased 9.2% Y-o-Y however it declined 4.0% sequentially to Rs. 43.9 per mmbtu, ahead of our estimates of Rs.42.7 per mmbtu on account of higher than expected marketing margins and regassification volumes. In Q3FY13, we estimate PLNG's marketing/trading margin increased 3% Y-o-Y, however, it declined 18% sequentially to ~$0.68 per mmbtu.Kochi terminal is likely to be commissioned in Q1FY14 as against our earlier expectation of Q1CY13. Kochi volumes are likely to be slower than expected on account of the delays in the GAIL's Kochi- Koottanad- Bangalore-Mangalore Pipeline (specifically the Kochi-Manglore pipeline section). The first phase (44 km) of Kochi-Mangalore pipeline is completed and the consumer end facility conversion is in process. BPCL's Kochi refinery and FACT are likely to be anchor customers for the initial volumes. PLNG management stated that Kochi refinery and FACT are likely to consume around 0.6 mmscmd (~0.17 mmt) and 1.2 mmscmd (~0.34 mmt) respectively at the current capacity levels. The second phase of the pipe line is facing delays on account of the land issues; however, recent media reports suggested that GAIL has increased the compensation packages. This we believe could speed up the completion of the second phase of the pipeline which GAIL plans to complete by December 2013. We cut down our Kochi terminal volumes to 0.25 mmt and 1.0 mmt in FY14E and FY15E respectively as against our earlier assumptions of 1 mmt and 3.0 mmt on account of slower than expected ramp up due to likely delays in pipeline connectivity.In the quarter, GSPC has booked a capacity of 2.25 mmtpa on a long term basis in the Dahej Terminal. A capacity of 1.25 mmt would be available from the Dahej terminal after the completion of the second jetty while the remaining 1 mmt of the booked capacity would be made available from the Dahej expansion. PLNG has already signed take or pay contract for 2.5 mmtpa of the 5 mmtpa Dahej Expansion with GAIL. With the signing of the GSPC contract, PLNG has effectively booked ~81.67% of the expanded 15 mmtpa capacity. PLNG management stated that the contracts are built with 5% annual escalation in the regasification tariffs.Net sales and PAT are expected to increase at a CAGR of 24.6% and 2.7% respectively over FY12-FY15E while EBIDTA is expected to grow at a CAGR of 5.8% in the same period. We increase our FY13 EPS to 15.7 as against our earlier estimates of 15.2; however, we have cut down our FY 14 EPS to 13.4 as against our earlier estimates of 15.7 mainly on account of lower than expected Kochi terminal volumes. Currently, we have not factored in the Ganagavaram project potential in our estimates. At CMP, PLNG is trading at 10.4x FY13E and 12.2x FY14E EPS of Rs. 15.7 and Rs. 13.4 respectively and at an EV/EBIDTA of 7.4x FY13E and 6.7x FY14E. We maintain buy rating on PLNG and roll forward our FY14 DCF based target price of Rs.197 per share, implying a potential return of 21% from the current levels," says FinQuest Securities research report.Institutional holding more than 40% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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