Buy Petronet LNG; target of Rs 285: KR Choksey

KR Choksey's research report on Petronet LNG

Petronet LNG Ltd. (PLNG) reported a net sales of INR 86.3 bln (+11.3% QoQ, +35.7% YoY) due to higher volumes processed from the regasification capacity at the Dahej terminal and efficiency in operations. The company’s overall volume processed for the quarter was 213 TBTU, a growth of 18% over FY17 out of which Dahej terminal operated at 109% of its nameplate capacity for the quarter producing 207 TBTU, a growth of 17% YoY. The gross Margins were impacted by  143 bps QoQ and 177 bps YoY to 11.5% due to higher gas prices resulting in higher RMAT (+38.4% YoY and 13.25 QoQ). Fall in the gross margins (-143 bps QoQ and 177 bps YoY) was negated by lower expenses for the quarter (-161 bps YoY) which resulted into a growth of 33.4% YoY into the operational performance. OPM fell by 16 bps YoY and 140 bps QoQ to 9.5%. Higher tax outgo (33.9% v/s 23.9% in Q4FY17) & lower other income (-31.4% YoY) impacted bottom-line to certain extent which was increased by 11% YoY to INR 5.2 bln. NPM fell by 134 bps YoY and 76 bps QoQ to 6.1%. The Board has also recommended a dividend of INR 4.5 per share.

Outlook
At a CMP of INR 213.2 PLNG is trading at an attractive valuation of 11.2x FY19E EPS and 11.0x FY20E EPS. We valued the company by assigning a P/E multiple of 15x on the FY19E EPS of INR 19.0 and arrived at a target price of INR 285 (potential upside – 33.6% ). We maintain BUY rating on the stock.

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