Maintain 'buy' on Petronet LNG - TP,Rs.171 - Geojit BNP Paribas Financial Services

- 1QFY13 PAT at Rs.270 crore is up 5.5% yoy and 10.5% qoq and the reported PAT is significantly higher than market expectations.

- Dahej utilization at 100% is below market expectations. The profit beat was on account of the one-off benefit of lower charter hire charges of Rs.20 crore and higher marketing margins.

- Management reiterated Kochi LNG completion guidance of November 2012 but remained cautious on volume uptick beyond 1 mtpa for FY14.

- Key highlight is Petronet LNG is exploring FSRU (floating regas unit) at Gangavaram by end FY14 with 2-3 million ton capacity. This would provide for volume visibility until FY16, when the onland facility comes on line.

- At the target price of Rs.171, the stock is valued at 12 multiple of FY14 expected EPS.

- On the regulatory front, the current price factors close to the worst case, implying normalized marketing margin at Rs.10/mmbtu.

- Dahej utilization is expected to pick up sharply in 2HFY13, on weak LNG prices which would widen the price gap to liquid fuels.

- High utilization at Hazira above 80% capacity provides comfort on demand for spot LNG.

Source : Equity Bulls

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