Buy Petronet LNG; target of Rs 171: KRChoksey

KRChoksey is bullish on Petronet LNG and has recommended buy rating on the stock with a target of Rs 171 in its April 25, 2012research report.

“Petronet LNG Ltd. (PLL) reported profit of Rs 245 cr (below our expectations of Rs 287 cr) mainly due to steep contraction in netback margins (9%). Total volume (long+spot+regasification) was 7% down on Q-o-Q mainly due to maintainace shutdown of few fertilizer and power plants during the quarter. EBITDA down by 27% on Q-o-Q, The company has reported higher other income due to forex gain of Rs 58 cr during the quarter. The company recommended dividend of Rs 2.5/share which is ~2% dividend yield to CMP.”

“Management reiterated view on marketing margins and regasification margins would not be regulated by PNGRB. Capital expenditure for FY13 would be ~Rs 1500cr (Rs 1200cr for expansion of Kochi terminal and Rs 300 cr for additional jetty at Dahej for regasification), second jetty would be commissioned in FY14. We expect slower ramp up volume. Scouting for new long term LNG sourcing contracts (mainly in USA ) for kochi terminal, Kochi terminal would be operational in Q4FY13, based on the above capex and commissioning of Kochi terminal we see of 11.5 , 13.6 mmtpa volume in FY13 & FY14. In Case of Kochi First full year of operations may not witness volumes more than 1.5 mmtpa as phase-II of the pipeline to Mangalore/Bangalore is yet to be completed. For Dahej, it has taken a 5% re-gas hike in January 2012. Management may review the same if required to do the same in future.”

“We believe the stock will be the major beneficiary of falling domestic gas volume (KG-D6) and increasing demand from the side of new refineries and power sector to keep the current capacity utilization above 105%.we believe PLL has very low exposure to regulation of margins by PNGRB and our best pick in Indian Gas space. we recommend BUY on PLL with price objective of Rs 171/share,” says KRChoksey research report.    

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