Sharekhan's research report on Petronet LNG
Petronet LNG’s (PLNG) Q4FY2020 adjusted operating profit of Rs. 907 crore (up 44.5% y-o-y; down 8.2% q-o-q) was below estimates, given lower margin on spot volume. In-line Dahej volume at 206 tBtu (down 7.2% q-o-q); Kochi utilisation improved to 20% in Q4FY2020. Sustained high Dahej terminal utilisation (recovered to 100% in June 2020), potential ramp-up of Kochi terminal utilisation in H2FY2021E (as Kochi-Mangaluru pipeline is nearing completion) and likely rise in LNG demand provide earnings visibility. PLNG’s valuation at 11.2x its FY2022E EPS seems attractive given earnings growth visibility (expect a 10% PAT CAGR over FY2020-FY2022E), strong RoE of 29%, dividend yield of 5-6%, and FCF yield of 6-7% in FY2022E.
Outlook
Hence, we maintain our Buy rating on PLNG with an unchanged price target (PT) of Rs. 300.
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