Angel Broking neutral on Petronet LNG

Angel Broking's report on Petronet LNG

"During 4QFY2014, PLNG's R-LNG volumes decreased 4.1 percent yoy to 117TBTUs. The contractual volumes stood at 92TBTUs, while spot cargos were 21TBTUs and the service cargos of GAIL and GSPC stood at 4TBTUs. However, the company's net sales grew by 23.2 percent yoy to Rs 10,428cr due to higher prices of LNG during the quarter."

"The cost of re-gasified LNG increased by 24.2 percent yoy to Rs 9,934cr. This resulted in EBITDA declining by 11.0 percent yoy to Rs 387cr. Other income grew by 51.9 percent yoy to Rs 31cr. However, interest and depreciation expenses increased by 218.3 percent and 113.7 percent yoy to Rs 79cr and Rs 100cr, respectively, due to capitalization of Kochi terminal. Consequently, the net profit declined by 30.9 percent yoy to Rs 169cr. The company has started operations at the 2nd jetty in Dahej from April 2014. However, the Kochi terminal continues to operate at very low utilization level due to the Kochi-Mangalore pipeline issue which is still unresolved."

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 and the stock has seen a sharp run up in the past couple of months. Hence, the current valuation at 10.7x FY2016 PE is fair in our view. Hence we recommend a Neutral rating on the stock", says Angel Broking research report.

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