Accumulate Petronet LNG; target of Rs 287: Dolat Capital Market

Dolat Capital Market's research report on Petronet LNG

PLL Q2FY21 numbers were ahead of our estimates due to resurgence in demand and Dahej terminal running at 100% plus capacity utilization. Revenue grew 27.7% QoQ, driven by the highest ever recorded volume. Operating profit rose 50% QoQ, due to cost efficiencies and higher utilization, and net profitability grew on account of higher Other income. The overall volumes were 254 TBTU in Q2FY21. Volume at Dahej was higher, due to addition of nameplate capacity of 2.5 MMTPA and shut down of the Dabhol terminal during the monsoons. 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 8-9 MMTPA of LNG.

Outlook

However, Q1FY21 was a low volume quarter, which have now recovered in Q2 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. We maintain our Accumulate rating with a DCF-based target price of Rs. 287.