Buy Petronet LNG; target of Rs 310: Motilal Oswal

Motilal Oswal's research report on Petronet LNG

PLNG numbers were largely in line with our estimate, with volumes (at 218Tbtu) and utilization rates (Dahej/Kochi at 92%/22%) flat YoY in 4QFY21. The second COVID wave and higher spot LNG prices have proved to be a double whammy for the company, with spot cargoes being deferred due to lower consumption. Dahej/Kochi is operating at a utilization rate of ~88%/~22% in 1QFY22 till date. The management expects Kochi utilization rate to ramp up by ~30% by the end of FY22 (earlier guidance of ~40%), while Dahej would continue to operate at over 95% owing to tied up contracts (16.5mmtpa of 17.5mmtpa).

Outlook

The stock trades at 9.8x FY23E EPS of INR23.4 and 5.6x FY23E EV/EBITDA. We value PLNG on a DCF basis to arrive at a fair value of INR310. Reiterate Buy.