Petronet LNG - Fundamental Call - Consortium

Petronet LNG (PLNG) reported net earnings of Rs3.19bn (+7.8% yoy, +1.2% qoq; 5.4% above estimates) during the quarter.

- Third-party regas volumes declined 36% qoq to 14 tbtu, while spot/ short term rose 7% yoy and 5% qoq, driving improvement in earnings.

- However, marketing margins on spot volumes declined 44% yoy and 7% qoq to ~US$0.40/ mmbtu.

- EBITDA of Rs5.29bn (+5% yoy, +2% qoq and 4% above estimates) and PAT of Rs3.19bn reflect this operational improvement.

Key positives: Increase in spot/ short-term volumes; blended margins too remain strong.

Key negatives: Kochi volumes for FY14E to be lower than initial estimates.

Impact on financials: FY13E earnings increased by 9% to Rs15.5/sh to factor in stronger tariffs/ volume. FY14E EPS reduced by ~6% due to lower Kochi volumes.

Valuations & view

Ongoing gas scarcity will continue to drive PLNG's prospects over FY13-15E. The new terminal at Kochi is set for commissioning by Q1FY14E and the Dahej terminal will expand capacity by 5m tpa by end of FY15E. With expansion of capacity by ~10m tpa by FY16E, plans to add another 5m tpa on the east coast and moderation in LNG prices going forward, we believe the fundamentals for PLNG remain robust. While multiples at CMP are reasonable (11x FY13E earnings and 7.5x EBITDA) factoring in tepid earnings over FY14E, we believe sufficient triggers exist over the next 18 months to warrant a positive view on the stock. Reiterate Outperformer with a revised TP of Rs192/sh, implying 16% upside from here.

Source : Equity Bulls

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