YES Securities' research report on Petronet LNG
PLNG’s 2QFY23 reported operating profit at Rs 11.7bn (‐10% YoY; +10% QoQ) stood ahead of our and street estimates, primarily on higher gas trading gains. PLNG reported a gas trading gain of Rs 2730mn (1Q: Rs 1030mn), stemming from operational efficiency, as it shifted its energy consumption to grid power, from expensive LNG, which in‐turn was traded. However, depreciation in INR also resulted in 980mn of forex losses, related to lease liabilities. The terminal utilization & throughput deteriorated during the quarter on account of weaker LNG import in the country as LNG price environment firmed up and supply from Gazprom contract got shunted. We believe that there are headwinds in the near term viz a) high LNG prices weighing on demand, b) commissioning of RIL’s MJ field by end of Dec’22, which could substitute LNG import, but in the longer run we believe, India’s dependence on LNG is only going to increase. In addition, PLNG is investing in brownfield and greenfield projects to cement its position in the LNG import market. Maintain BUY.
Outlook
We value PLNG at Mar 24 TP of Rs 320/sh on DCF basis, implying a target PE multiple of 15.4x FY25e, vs 10.3x the stock is trading at. The current trading multiple is one standard deviation below PLNG’s mean trading multiple, which is closer to our target multiple.
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