Reduce Petronet LNG; target of Rs 171: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss’s report on Petronet LNGPetronet LNG’s (PLNG) Q2FY16 results surpassed estimates, with PAT at INR 2,488mn (up 42% QoQ and down 5% YoY), 19% ahead of consensus. Earnings were driven by doubled QoQ third‐party Dahej volumes and USD0.35/mmbtu recovery in sequential trading margins. Dahej terminal utilisation improved 23% sequentially to a 5‐year high 108%, while Kochi continued to disappoint in the absence of evacuation pipelines. PLNG has so far (9mCY15) deferred 32% of its contracted expensive long‐term RLNG (term LNG) volumes from RasGas against permissible 10% annual deferment. Although management remained confident that any liability on account of shortfall will be passed through to off‐takers, we would liketo await the financial settlement in Q4CY15.Nevertheless, the contractual commitment in Q4CY15 would imply entire Dahej terminal capacity could be booked for servicing term cargoes, foregoing spot trading margins. We have increased our FY17E EPS by 13% on higher volumes and revised our target price to INR 171 (INR152 earlier). Maintain ‘REDUCE’ on expensive valuations.Outlook and valuations: Uncertain volumes; maintain ‘REDUCE’ A modest RoE of 16% does not justify a high FY17E P/BV multiple of 2.0x, especially as there will be a risk to re‐gasification charges amid increasing competitive intensity from new projects. We retain ‘REDUCE/SU’ with a DCF‐based target price of INR 171. At CMP of INR 191, the stock trades at 13x FY17E PER, says Edelweiss Securities Limited research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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