Buy Petronet LNG; target of Rs 195: Emkay

Emkay Global Financial Services is bullish on Petronet LNG and has recommended buy rating on the stock with a target of Rs 195 in its April 25, 2012 research report.

“Petronet LNG reported its results which were below our and street expectations. Revenue for the quarter was at Rs.63.7bn, flat on QoQ, mainly due to lower volume offtake from some of the power and fertiliser companies on account of maintenance shutdown. EBITDA during the quarter was at Rs.4.2bn, decline of 15.9%, QoQ. EBIDTA margin declined by 131bps QoQ to 6.6% (217bps YoY). During the quarter the company reported a net profit of Rs.2.4bn, decline of 17% on QoQ basis.”

“Revenue for the quarter stood at Rs.63.7bn flat on QoQ basis, due to decline in volumes by 6.8% QoQ to 135tbtu during the quarter. Volumes have declined mainly on the account of 1) maintenance shutdown in some of the fertiliser companies, and 2) lower demand from power companies in north India due to weather conditions. Net profits declined by 17% QoQ to Rs.2.4bn as both lower volumes and decline in marketing margins impacted the profitability of the company. Marketing margin on spot volume has declined to $0.48/mmbtu from $1/mmbtu. However, we expect volume would increase in the future as the power and fertilser companies will resume their operations post the annual maintenance shut downs.”

“March12 Qtr results were below our and market expectations mainly due to lower volume offtake and decline in marketing margins. We expect volume offtake to improve during the next quarter as fertiliser and power plants will resume their operations post the annual maintenance shut downs. However the recent news on proposed cap on gas marketing margin which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges. Currently, stock trades at 9.6x FY13E EPS and 9.1x P/BV. Based on the recent correction in the stock price we changed our rating from Accumulate to Buy and maintain our TP of Rs.195,” says Emkay Global Financial Services research report.         

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