Maintain 'buy' on Petronet LNG – TP Rs.171 - Geojit BNP Paribas

- Buy rating on Petronet LNG is retained with a target price of Rs.171. The stock is currently traded in the range of Rs.169.

- The company reported 2QFY13 PAT at Rs.3.15billion, 21% higher y-y/ and 16% higher q-q. PAT is above the market estimates.

- The beat was primarily on the back of a Rs.1.1billion forex gain, which seems on account of the company's trading portfolio.

- Dahej utilization was better at 107% vs 100% in 1Q, driven by higher spot/third-party cargoes, which indicates a revival in demand.

- Management hinted at a start of the Kochi plant only by Mar 2013, a possible near-term dampener.

- Pipeline connectivity to FACT/BPCL is complete, but management said certain customers are not 100% ready for LNG conversion.

- Long-term projects (Dahej brownfield/ Gangavaram) are on track for 2015/16.

- Current price is very close to the target price and we will re-visit our estimates.

- The company continues to beat estimates on higher trading margins which are difficult to estimate.

- It is estimated that current share price factors in trading margins of Rs.25/mmbtu versus Rs.40/mmbtu, which the company has earned over the past seven quarters.

- Petronet LNG's long term potential remains unquestioned as India's gas demand continues to increase along with stability in LNG prices.

- However, it seems that the share is due for a breather as the market evaluates future upsides from increased utilisation from jetty expansion and benefits from the Gail cash infusion for Dahej expansion.

- Risks to the projections - regulatory overhang and decline in utilisations.

Source : Equity Bulls

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