Buy Petronet LNG; target of Rs 285: Kotak Securities

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Kotak Securities' research report on Petronet LNG

With a ban on the usage of petcoke (petroleum coke)/furnace oil, improving gas demand from power/fertilizer sector and no major ramp-up in domestic gas production in the near-term, LNG demand in India is expected to rise meaningfully, we opine. The key beneficiary of the same is expected to be PLNG.In Order to meet the rising domestic gas demand, PLNG is adding RLNG capacity of 2.5 MMTPA in Dahej to 17.5 MMTPA by FY19E. Recently, it has expanded Dahej capacity by 50% to 15 MMTPA 90% of its capacity is contracted, giving decent revenue visibility.

Outlook

We recommend BUY rating on the stock with a price target of Rs.285/- including equity value of 26% stake in Dahej Port. Given that most of the capacity at Dahej is tied-up, there is strong visibility on the free cash flow yield.For all recommendations report, click here

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