Accumulate Petronet LNG - Dolat Capital

- Petronet LNG (PLL) shall be the key beneficiary of the structural play on India gas consumption over the medium term. The supply crunch in domestic gas market due to decline in KG D6 gas volumes as well as lack of new supply from domestic sources shall drive demand for spot RLNG volumes.

- We believe PLL's ability to double its capacity over next four years shall be a key driver of revenue growth. Given the business model, PLL does not carry the risk of rupee depreciation and neither the gas price as both the re-gasification margin and the off-take of re-gasified gas is fixed for the confirmed off-take volumes. This combined with the operational efficiencies (expected to be 10% over name plate capacity) would enable PLL to take advantage of the market demand by bringing in spot cargoes, and earn better margins as well.

- We also believe that the recent notification by Oil Ministry to set aside 20% of the re-gasification capacity for spot / short term cargoes would not have any impact on any terminal (Dahej and upcoming Kochi) of PLL.

- Key risks to our stance shall include a cap on re-gasification margins and delay in capacity ramp-up.

At CMP, the stock trades at 10.8x FY13E and 9.9x FY14E earnings. We have a positive view on the stock with a DCF based price target of Rs.180.

Source : Equity Bulls

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