Petronet LNG - Positives priced in - Prabhudas Lilladher

Petronet LNG's (PLNG's) Q3FY13 result was better than our expectation on the EBITDA and bottom-line front. Top-line registered a growth of 33.1% YoY to Rs84.2bn (Rs63.30bn) on account of 38% YoY growth in realisations, while the volumes were down on YoY basis at 140.6TBTU. EBITDA/TBTU witnessed an expansion, from Rs34.7/TBTU in Q3FY12 to Rs37.6/TBTU in Q3FY13, broadly in line with our estimates. Bottom-line, during the quarter, stood at Rs3,185m (Rs2,954m), an increase of 7.8% YoY as against our expectation of Rs3,003m.

- Confluence of higher spot marketing margins and higher volumes: Our calculation suggests that the company made gross marketing profits on spot volumes of Rs1,663m (27.4% of the reported gross margins for the quarter). Spot volumes increased ~11.3% QoQ to 30.5 TBTU, while tolling volumes declined QoQ to 13.5TBTU. Despite higher spot volumes QoQ, lower marketing margins resulted in EBITDA per TBTU declining to Rs37.6 per TBTU (-2.0% QoQ).

- Outlook: We believe the benefit of strong marketing margins and utilizations at Dahej is adequately captured into the CMP and stock price appreciation from the current juncture will be contingent on positive developments on Kochi terminal (increased linkages at affordable prices), coupled with timely execution of the Phase-II pipeline. In our view, muted earnings growth over the next couple of years, along with potential regulatory risks (overhang of potential regulation of the re-gasification tariffs as well as marketing margins), outweighs potential positive triggers. We maintain 'Accumulate' with DCF-based target price of Rs180/share, implying target P/E of 12.4x FY14.

Source : Equity Bulls

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