Emkay Global Financial's research report on Petronet LNG
PLNG’s Rs207bn petchem foray is difficult to quantify in terms of value add, but we do not foresee a washout and believe the stock is investible, going by its valuations and balance sheet. Sector outlook too is stable, with LNG prices under control. Renewal of the QatarGas deal (likely within 1-3 months) is a key event, as a 15-20-year extension would give long-term earnings visibility on core business, and factors like annual escalation in regas charge continuing are likely to be a significant trigger.
Outlook
In our SA model, we assume avg. core capex of Rs15bnpa and equity investment of Rs52bn in petchem, with nil contribution from the latter and Gopalpur; but even assuming full petchem capex in SA and Rs60bn from a land-based unit in Gopalpur, debt/equity would stay under 1x and even 70% DPR be maintainable. We cut TP by ~8% to Rs245; retain BUY.
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