Petronet LNG - Sweet spot margin - IDBI Capital

Petronet LNG Ltd. (PLNG) Q2FY13 revenue came in-line with expectation while operating profit and PAT exceeded our expectation on the back of strong marketing margins. The company's revenue increased 41% YoY, EBITDA grew 15.6% and net profit was up 21% YoY to Rs3.1 bn in Q2FY13. Volume remained flattish YoY to 135tbtu (IDBIest 137tbtu), while margin from spot cargoes jumped significantly to Rs55/mmbtu compared to Rs35/mmbtu in both YoY and QoQ, ahead of our expectation.

The company expects its Kochi terminal to start from Q1CY13. However, utilization level is likely to remain low till Kochi-Bangalore pipeline gets commissioned by end-2013. Further, Dahej terminal expansion plan is going on track which is likely to complete by end-2015. We have extended the impact on depreciation and interest from FY14 due to delay in start of Kochi terminal. Consequently, we are increasing our PAT estimates upwards for FY13 by 8% and keeping FY14E estimates unchanged.

We are revising our DCF-based target price upwards to Rs187 from earlier Rs165 on the back of decline in WACC to 11.2% from earlier 12.4%. We upgrade the stock to ACCUMULATE from earlier HOLD.

Source : Equity Bulls

Keywords