Petronet LNG - Centrum

A pleasant surprise

Petronet yet again surprised us and the markets with an excellent set of numbers with re-gasification volumes soaring by 21.0% YoY and 7.3% QoQ to 144.9TBTUs. With higher re-gasification tariffs on spot LNG, blended re-gasification margins came in at Rs38.6/mmbtu, higher by 19.0% YoY and 4.3% QoQ. The interest cost also decreased due to prepayment of Rs5bn debt. With higher re-gasification volumes and tariffs, and lower interest expenses, PAT surged by 72.9% YoY and 13.5% QoQ.

Revenues surge led by higher spot LNG prices and rupee depreciation: Petronet's revenues surged by 74.5% YoY and 18.0% QoQ at Rs63.3bn on account of higher spot LNG prices (ruling at about US$15/mmbtu) and rupee depreciation (LNG is dollar denominated).

Volumes surge and so too re-gasification margins: The company processed a total of 144.9TBTUs of LNG comprising 98.4TBTUs longterm volumes, 24.7TBTUs spot volumes and 21.8TBTUs re-gasification services offered to GAIL and GSPC. On an annualized basis, the company operated its terminal at 11.4mmt (over 115% capacity utilisation). Even though the spot LNG prices ruled over US$15/mmbtu (high due to winter season), the company managed to earn higher regasification+ marketing margin at US$1.2/mmbtu which led to superior performance.

Debt repayment lowers interest outgo: Petronet prepaid over Rs5bn of debt during the quarter, thus reducing its interest outgo by 24.8% QoQ at Rs345mn. With higher re-gasification volumes and tariffs, and lower interest expenses PAT surged by 72.9% YoY and 13.5% QoQ to Rs3.0bn.

Kochi to be operational by Q3FY13, DFR for new terminal at East coast: Kochi terminal is 94-95% complete and could receive its first cargo in August 2012. It is expected to start commercial operations by Q3FY13. Petronet board has also approved to conduct feasibility studies on the new terminal at Gangawaram port in the East coast. This new LNG facility can cater to the eastern market and even supply bulk customers like HPCL refinery and Vizag Steel plant. The detailed feasibility project report (DFR) is expected by April 2013. With continuous capacity expansion, we remain optimistic on growth prospects of Petronet and the commissioning of its Kochi terminal is likely to be the next catalyst. We maintain our 'Buy' rating on the stock with DCF based price target of Rs193 (earlier Rs191) (cost of equity – 11.4%, WACC – 9.5%).

Source : Equity Bulls

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