Buy Petronet LNG: target of Rs 300: Sharekhan

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Sharekhan's research report on Petronet LNG

Sharp recovery in LNG imports (up 12% y-o-y in November and continuous y-o-y growth since July) would help Petronet LNG (PLNG) to sustain high utilisation rate for its Dahej terminal. PLNG to also take 5% re-gas tariff hike for Dahej terminal from January 2021. We do not see any concern on volume outlook from the recent rise in spot LNG price as 98% of volume comes from long-term and tolling contracts. Kochi terminal utilisation to reach breakeven level of 25% by Q4FY2021. PLNG is well positioned to tap India’s rising LNG consumption with 2mmt expansion at Dahej terminal, ramp-up of Kochi terminal utilisation, and focus to enter LNG retailing business. We believe PLNG should command higher valuation multiple given earnings visibility (12% PAT CAGR over FY2021E-FY2023E) in uncertain times, high RoE of 29%, healthy FCF/dividend yield of 8%/6%, and non-regulated business.

Outlook

Hence, we maintain our Buy on PLNG with an unchanged PT of Rs. 300.

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