Petronet LNG - All round performance; Reiterate top pick - Spark Capital

Petronet LNG (PLNG) reported better than expected results with EBITDA growing by 13% qoq (+16% yoy) to Rs.5.2bn, driven by higher trading margins and higher qoq volumes. Trading margins on short term/spot contracts came in significantly higher at $0.83/mmbtu ($0.56/mmbtu in 1Q) due to competitive sourcing. Despite superior margin PLNG's spot prices were lower than its peers (GAIL/GSPC).

Management reiterated that forex gain of Rs.1.14bn should be clubbed with material cost and they do not bear any forex risk. Adding this gain to gross profits, underlying spreads grew by 11% qoq (+20% yoy) to ~Rs. 44/mmbtu. Volumes of 2.65mmt (106% utilisation) grew 6% qoq as Urea units witnessed no shutdowns and higher offtake in power sector.

Overall, PAT grew by 16% qoq and 21% yoy. We upgrade our FY13 PAT estimates by 6%, after incorporating the current margin beat and lower depreciation/Interest on slight delay in Kochi commissioning, partly offset by reduced throughput volume at Kochi. Our FY14 and FY15 estimates remains largely unchanged.

PLNG remains our top pick among the Gas Utilities given least regulatory risks and strong growth visibility. Timely progress in Kochi PL and sealing of long term/short term contracts would be near term triggers. Maintain Buy with TP of Rs. 218.

Source : Equity Bulls

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