Accumulate Petronet LNG; target of Rs 210: Angel

Angel Broking's report on Petronet LNG
"Petronet LNG (PLNG)’s top-line for 1QFY2016 declined by 17.6% yoy to Rs 8,377cr, on account of lower LNG prices. Despite the decline in revenues, the gross margin for the quarter remained flat at Rs 469cr, as against Rs 461cr in 1QFY2015, led by 1) Rs 50cr revenue at the Kochi terminal from reload services, and 2) higher utilization at the Dahej terminal. EBITDA for the quarter outperformed expectations, coming in at Rs 361cr, ie ahead of the street estimate of Rs 349cr. The net profit jumped 58% yoy to Rs 248cr on account of tax reversals pertaining to prior years under Section 80-IA of the Income Tax Act."

"The Dahej terminal operated at ~98% capacity or 125.41 TBTU during the quarter as against ~74% in the sequential previous quarter. Utilisation levels at Kochi terminal remained low at 6-7% and would continue to remain low as the Kochi-Bangalore pipeline by GAIL would take another two years to complete. The Kochi terminal reported a cash profit for the first time on account of Rs 50cr of reload revenues."

Outlook and valuation: "PLNG is a direct play on the opportunity arising out of gas deficit in India. The company’s strong expansion plan makes it wellpositioned to benefit from the demand supply gap. The stock currently trades at 21x and 17x its FY2016E and FY2017E EPS. On the basis of discounted cash flows (DCF), we arrive at our target price of Rs 210 and assign an Accumulate rating on the stock", says Angel Broking research report.

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