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Petronet LNG - Gross margin expansion drives net profit higher; maintain Buy - BRICS
Posted On : 2012-10-23 22:16:48( TIMEZONE : IST )
PLNG's net profit grew 21% yoy to Rs3.14bn (vs. our estimate of Rs2.62bn), driven by an expansion of 8% yoy in gross margin to Rs44.3/mmBtu (vs. our estimate of Rs39.3/mmBtu). The higher than expected gross margin was due to improved trading margin on spot cargoes and better operational efficiency, on account of an increase in utilization rate of Dahej terminal. We raise our DCF-based 12-month target price by 9% to Rs195, as we rollover to our Q2FY14 estimates. Maintain BUY on an upside of 16% to our target price.
Net profit up 21% yoy, led by expansion of 8% yoy in gross margin: PLNG's net profit grew 21% yoy to Rs3.14bn (vs. our estimate of Rs2.62bn), driven by expansion of 8.2% yoy in gross margin to Rs44.3/mmBtu (vs. our estimate of Rs39.3/mmBtu). The higher than expected gross margin was due to improved trading margin on spot cargoes and better operational efficiencies, as a result of an increase in utilization rate of Dahej terminal. Volume remained flat yoy, but increased 6.3% qoq to 135 TBTU (long term 90.2 TBTU, short term/spot 27.4 and service cargo 17.4 TBTU).
Expansion plans on track: Management expects the Kochi terminal to begin commercial operations in Q4FY13 and connectivity to its anchor customer (BPCL) has been completed. All necessary modifications for accepting gas from PLNG at BPCL's Kochi refinery will be completed by Q4FY13. Management has guided for a slow ramp up from the terminal, due to a slower off-take in new markets and regas tariff to be between the Dahej tariff and US$1/mmBtu. The second jetty at Dahej is expected to be completed by Q4FY14. The planned capacity expansion of the Dahej terminal to 15mmt is on track and will be completed by CY15. The EPC contract for this project is likely to be awarded by FY13 and environmental clearance for the Gangavaram terminal is expected in Q3FY13.
Raising DCF-based target price by 9% to Rs195; maintain BUY We are raising our 12-month forward target price by 9% to Rs195, as we rollover to our Q2FY14 estimates. We believe that PLNG will deliver good numbers, given the strong demand for LNG in India, declining domestic gas production and moderating global RLNG prices. The stock currently trades at 11.7xFY13 and 11.2xFY14 our estimates, which shows an upside of 16% to our target price of Rs195. Maintain BUY.
