Angel Broking neutral on Petronet LNG

Angel Broking's report on Petronet LNG

"Petronet LNG, (PLNG)'s R-LNG volumes decreased 8.9 percent yoy to 123TBTUs. The contractual volumes stood at 98TBTUs, while spot cargo and tolling volumes were at 23TBTUs. Despite lower volumes, net sales grew by 25.8 percent yoy to Rs 9,493cr due to higher prices of LNG during the quarter. Lower tolling volumes lead to decline in profitability: The cost of LNG re-gasified increased by 29.9 percent yoy to Rs 9,032cr which led to the EBITDA declining by 29.8 percent yoy to Rs 364cr whereas the EBITDA margin declined by 303bp yoy to 3.8 percent in 2QFY2014 mainly due to lower tolling volumes. Depreciation and interest costs increased by 27.7 percent and 22.2 percent yoy to Rs 60cr and Rs 39cr, respectively, due to capitalization of the Kochi terminal during the quarter. Hence, the net profit declined by 42.3 percent yoy to Rs 182cr." "The Kochi terminal commenced operations during the quarter and operated for 20 days. The Management now expects the Kochi-Mangalore pipeline to start during October 2014 (previous guidance was of March 2014), which will keep the company's Kochi terminal utilization levels low over the coming one year, in our view." Outlook and valuation: "PLNG is well-poised to benefit from the gas demandsupply mismatch in the country over the long-term. It has also lined up aggressive capex plans to increase capacity over the coming three-four years. However, earnings growth is likely to suffer in the coming one year on account of lower utilization levels at its recently commenced Kochi terminal. Hence, we recommend a Neutral rating on the stock," says Angel Broking research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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