Petronet LNG - 1QFY2013 Result Update - Angel Broking

We resume our coverage on Petronet LNG's (PLNG). For 1QFY2013 the company's net sales increased by 52.1% yoy to Rs.7,030cr on the back of higher realization. However, higher costs restricted bottom-line growth to 5.6% yoy. We recommend Buy rating on the stock.

Higher realization drives top-line growth: PLNG's R-LNG volumes declined by 4.5% yoy to 127TBTU on account of maintenance shutdowns of some of the fertilizer plants in the month of April. Contractual volumes stood at 91TBTUs, while spot cargo and tolling volumes were 36TBTU in this quarter. However, average realization improved by 61.1% yoy to Rs.551/mmbtu. Hence, net sales increased by 52.1% yoy to Rs.7,030cr.

Higher costs mutes net profit growth: EBITDA/mmbtu increased 26.3% yoy to Rs.41.5 mainly on account of higher long term volumes and dry docking of one charter ship. However, EBITDA margin contracted by 198bp yoy to 7.5% due to increase in cost of goods sold (+55.6% yoy to Rs.6,433cr). Hence, EBITDA increased only 20.3% yoy to Rs.527cr. Tax rate increased to 33.1% in 1QFY2013, compared to 31.0% in 1QFY2012. Hence, net profit grew by only 5.6% yoy to Rs.271cr.

Outlook and valuation: PLNG is well-poised to benefit from gas demand-supply mismatch in the country. It has also lined up aggressive capex plans to increase capacity from 10.0mn tonnes to 17.5mn tonnes over the coming 3 years. The stock is currently trading at 10.2x FY2013E and 9.1x FY2014E EPS. Valuing the stock at 11.0x FY2014 earnings, we derive a target price of Rs.176 and recommend Buy rating on the stock.

Source : Equity Bulls

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