Buy Petronet LNG; target of Rs 240: ICICI Direct

ICICI Direct recommended buy rating on Petronet LNG with a target price of Rs 240 in its research report dated August 11, 2017.

August 14, 2017 / 17:42 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Petronet LNG

Petronet LNG reported its Q1FY18 results, which were largely in line with our estimates on the profitability front. The topline increased 20.6% YoY to Rs 6435.1 crore below our estimate of Rs 6644.9 crore on account of lower than expected volumes. Total sales volumes were at 191.7 tbtu, below our estimates of 200.5 tbtu mainly on account of lower short/spot volume at 5.6 tbtu (our estimates: 11 tbtu) EBITDA of Rs 744.2 crore came in above our estimate of Rs 724.9 crore due to higher blended margins at Rs 46.4/mmbtu (our estimate: Rs 43.5/mmbtu) Subsequently, PAT during the quarter increased 15.8% YoY to Rs 437.6 crore largely in line with our estimates.

Outlook

Petronet LNG’s back-to-back LNG purchase-sales agreement provides comfort on the business model. It remains a structural story of India’s increasing gas demand. With India continuing to be significantly short of natural gas supply, Petronet LNG will benefit as the primary play on increasing usage of LNG. In the long term, we expect volumes to show stable growth and will contribute to higher profitability. We value the stock based on DCF methodology (WACC 11%, terminal growth 3%) to arrive at a price target of Rs 240 with a BUY rating.

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