Petronet LNG Ltd. share price target

Petronet LNG (PLNG) reported a strong set of numbers in Q2FY2020 with adjusted operating profit at Rs. 1,046 crore (up 16.2% y-o-y; up 13.9% q-o-q) and adjusted PAT stood at Rs. 818 crore (up 42.5% y-o-y; up 37.6% q-o-q), above our estimates of Rs. 726 crore. The strong performance was driven by sharp jump in Dahej re-gas volumes to 240 tBtu (up 13.7% y-o-y; up 10.6% q-o-q). The Kochi terminal's utilisation rate also improved to 15.7% from 14.1% in Q1FY2020. PLNG's strong volume led earnings visibility (we expect a 16%...

Weekly Eco Wrap: India corporate tax cut to boost investments. PLNG IN: Concerns seem overstated on investments in Tellurian

23 September 2019 Oil & Gas The Tellurian liquefaction project at Lake Charles in the US will source gas from the Permian basin, where the wellhead cost of gas is currently at - USD0.25/mmbtu. The project might also source gas from Marcellus and other fields as and when the economies of gas sourcing appear favorable. Assuming sourcing of gas at USD1/mmbtu, along with pipeline, liquefaction and other costs at USD1.5-1.8/mmbtu, the landed price in India would be no more than USD5.5-6.0/mmbtu. The contract with Tellurian would also assist PLNG with expiry of its LT RasGas contract in 2028. PLNG expects Tellurian gas landed price in India to be under USD6/mmtbu. Long-term gas demand in India will get a further boost from various directives of the National Green Tribunal (NGT) and the respective state Pollution Control Boards (PCB) to shift from dirty fuels to usage of natural gas as an important tool to reduce air pollution.

Our recent meeting with the Petronet LNG (PLNG) management has reinforced our core investment thesis.

27 August 2019 Company Update Oil & Gas Spot LNG prices have weakened (trading at ~6-7% slope to Brent) amid rising supply glut with expansions in the US, Australia and Russia. Taking advantage of low LNG prices, the Gujarat Electricity Regulatory Commission (GERC) has approved the 278MW long-term PPA (for 19 years) for Ahmedabad and Surat distribution circles. Low LNG prices have resulted in the government looking for possible solutions to revive gas-based power plants. The National Green Tribunal (NGT) has directed the Central Pollution Control Board (and respective State PCBs) to shut critically polluted industrial clusters within three months. NGT has identified 100 industrial clusters on which the environmental assessment studies were conducted for classification under critically polluted, severely polluted and not-polluted categories. Dahej is witnessing almost full utilization of its 17.5mmt capacity, with 15.75mmtpa tied up for long term, ~0.8-0.9mmt of Kochis Gorgon volumes and other another 0.

Revenue declined 6.1% y-o-y to Rs 8,613 cr in Q1FY20. Petronet LNG Limited reported 9.6% y-o-y increase in EBITDA in Q1FY20 to reach Rs 1,023.9 cr. EBITDA margin improved by 170bps y-o-y to 11.9% due to high margin product mix and lower costs. Operating profit for Q1FY20 has remained constant at Rs. 834 cr. primarily because of decrease in cost of sales, which stood at Rs 7,418 cr. (vs. Rs. 8,084 cr. in Q1FY19). During Q1FY20, Dahej terminal had capacity utilization of around 112% and processed around 217 TBTUs of LNG against 199 TBTUs in Q1FY20 and 214 TBTUs in Q4YFY19. Overall LNG volume processed by the company in the current quarter is at 226 TBTUs...

Rising competition from new LNG terminals and capital allocation are unlikely to have structural impact on pricing or volume growth as Petronet remains India's lowest cost regassifier. With no major capex, PLNG can generate free cash flow of over Rs 57.67bn over FY20-22E. It is searching for growth opportunities in overseas markets and after its stumble at Kochi, we believe PLNG will allocate capital more prudently in future. Stock is currently trading at 11.7x FY21E EPS and 6.5x FY21E EV/EBITDA. In our view, we see the risk/reward as favourable, given the rising return ratios and strengthening balance sheet. We maintain BUY on PLNG post a stable performance in Q1. Expected ramp-up at both terminals, predictable earnings from tied-up volumes and robust gas demand driven by benign spot LNG prices keep our faith intact

Petronet LNG (PLNG) Q1FY19 result was operationally in-line with our forecast (adj. to Ind-AS 116 impact). Revenue declined by 6.1% YoY to Rs86 bn, EBITDA (adjusted to Ind AS 116 impact) declined marginally by 3% YoY to Rs9.1 bn whereas Adjusted PAT (adjusted to Ind AS 116 impact) grew by 4.3% YoY to Rs6.1 bn. Volumes came at 226tbtu (217tbtu at Dahej) slightly above our forecast of 217tbtu. The company stated that its Dahej expansion to 17.5mtpa from 15mtpa has completed and is now operational from Jun'19 and Kochi-Mangalore pipeline to commission by Oct'19 which would boost volume from Q3FY20. We keep FY20 and FY21 estimates unchanged and...

Petronet LNG's (PLNG) reported numbers are 6%/7% lower than ours/consensus estimates in 1QFY20. Net sales fell by 6% YoY to Rs86.1bn led by 11% YoY fall in long-term LNG volume at Dahej. The Company receives higher tariffs on long-term volume compared to only Regas volume. Reported EBITDA grew by 10% YoY to Rs10.2bn (13% above our estimate), as the Company adopted Ind AS 116 with Lease Liability of Rs38.3bn. Classification of the lease rentals for the current quarter has been changed from the Cost of the Goods Sold' and Rent Expenses', as the case may be, in the P&L; account to Depreciation' and Finance Cost'. EBITDA margin improved 170bps YoY to 11.9%. Net profit fell by 5% YoY to Rs5.6bn (4% below our estimate), owing to Ind AS116, which led to Rs516mn decrease in PBT. Adoption of Ind As-116 resulted into...

Lower spot LNG prices, summer demand boost volumes PLNG reported 1QFY20 results based on Ind-AS 116. Reported EBIDTA came in 17% higher than our estimate at INR10.2b (+10% YoY), led by lower other expenditure under the new accounting standards. Depreciation stood at INR1.9b (+86% YoY) and interest cost at INR1.0b (~3-4x). Reported PBT of INR8.4b was in line with our estimate. Adjusting for Ind-AS loss of INR516m, PBT was 3% above our estimate at...