Buy State Bank of India; target of Rs 328: HDFC Securities

HDFC Securities' research report on State Bank of India

Petronet LNG (PLNG) reported strong numbers in 4QFY18. EBITDA came in at Rs 8.22bn (+33.4% YoY), led by higher volumes. Company delivered total volumes of 213tbtu (~4.17mmt), up 18.4% YoY. APAT was at Rs 5.23bn (+11% YoY), owing to higher tax rate at 33.9% compared to 23.9% in 4QFY17. Tax rate was lower in 4QFY17 due to benefits accruing from investment allowance reserve policy. As per the policy, companies are allowed to deduct certain costs pertaining to investments from tax.  Kochi terminal utilisation is expected to increase from 12% in FY18 to 34% in FY20 with increase in LNG offtake post completion of Kochi-Mangalore pipeline by Dec-18. Anchor customers OMPL, MFL are equipped to receive LNG. MRPL is expected to receive LNG by Mar19 by slightly tweaking its facilities.

Outlook

A relatively low re-gasification tariff compared to competitors (~20% lower Regas tariff compared to Dabhol terminal), well-connected terminals and tied up capacity with off-takers ensures healthy utilisation of PLNG’s terminals, despite competition from new terminals. Our TP is Rs 304/sh (18x FY20E EPS). Maintain BUY.