Accumulate Petronet LNG; target of Rs 283: Dolat Capital Market

Dolat Capital Market's research report on Petronet LNG

PLL Q3FY21 numbers were below our estimates on revenue front as some volumes moved from Dahej terminal to Dabhol terminal and results were above estimates on profitability front due to inventory gains, trading margins, higher utilization and operating efficiency. Revenue grew 17.5% QoQ and de-grew 17.8% YoY. Operating profit declined 2% QoQ and grew 20.6% YoY, due to inventory gains, cost efficiencies and higher utilization, and net profitability grew on account of higher Other income. The overall volumes were 235 TBTU in Q3FY21. Volume at Dahej was 222 tbtu, as demand returned to Pre Covid levels, however sequentially volumes were down as with the opening of Dabhol terminal post monsoon volumes moved from Dahej terminal. Given gradual capacity addition and increase in re-gasification margins, PLL is likely to benefit from the gas demand evolution in India. PLL is also poised to benefit from the uptick in gas demand and the setting up of small scale LNG stations which will consume 7-8 MMTPA of LNG.

Outlook

However, Q1FY21 was a low volume quarter, which have now recovered in H2FY21 with 100% plus capacity utilization, with industries starting up and higher offtake of gas from CGD, Power and other industries. We believe the stock should be re-rated, after the completion of pipelines for the Kochi terminal in Nov’20. We maintain our Accumulate rating with a DCF-based target price of Rs. 283.

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