Buy Petronet LNG; target of Rs 300: Emkay Global Financial

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Emkay Global Financial's report on Petronet LNG

While the Tellurian MoU is on till Dec’20 and PLNG is also going for the east-coast terminal, we believe that management is targeting low spot pricing for new LNG and 30% base utilization for a new terminal, implying judicious capital allocation. Q1FY21 EBITDA/APAT declined 11%/13% yoy (up 30%/down 8% qoq) to Rs9.1/5.2bn, beating estimates by 17%/15%, due to 10% higher Dahej volumes, 21% lower Other Expenditure and Kochi tariff/implied spot LNG marketing margin above our estimates. Dahej terminal operated at 82% capacity and Kochi at 14% (in line). Dahej long-term volumes fell 20%, but tolling was down by only 5% qoq. EBITDA/mmbtu rose 6% yoy/50% qoq (due to Ind-AS 116 impact) to Rs47.9. Spot margin was USD1.9 vs USD0.5/mmbtu est.

Outlook

We upgrade PLNG to Buy with an EW stance. We raise the TP by 4% to Rs300 as we roll over to Sep’22E. We raise FY22/23E EPS by 9%/4%, building in high Dahej volumes and Kochi regas tariff. PLNG is a value pick on resilient earnings and high ROEs.

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