Petronet LNG - Kochi uncertainty to weigh on stock - ElaraCapital

Q4FY13 volume disappoints

Petronet LNG reported its Q4FY13 results with revenue in-line, but lower than estimated margins leading to EBITDA of INR3.76bn vs. our expectations of INR3.97bn. The Q4FY13 volumes were weak at 123TBTUs, depicting weakness in spot volumes which suffered due to high global LNG prices. Regas charges stood at INR42.7/TBTU for Q4FY13, down from INR43/3/TBTU from Q3FY13. Overall, the bottom-line came in at INR2.45bn against our and Street estimates of INR2.55bn.

Kochi ramp-up unclear, FY14 should be weak

On the results concall, the PLNG management was cautious in terms of Kochi ramp-up, indicating less than 10% utilisation of the 5MMT terminal in FY14. This is the second straight quarter where PLNG has slashed volume expectations for Kochi and this implies that the FY14 & FY15 earnings downgrade cycle will continue further. Kochi terminal commissioning will be around Jul'13 (from Apr'13 earlier) and expect full capacity utilisation only by FY16/17 due to pipeline constraints and gas offtake. The Dahej jetty is expected to be operational in Q4FY14 and thus Dahej would be operating at 10-10.5MMT of volumes in FY14. Contract awards for further Dahej expansion to 15MMT will start mid-FY14 and commissioned only by FY16. The FY14 bottom-line would be hit mainly due to the impact of depreciation and interests costs from the Kochi terminal. The Kochi terminal capex is INR45bn, of which INR26bn is debt financed.

Stock likely to languish on medium-term earrings sluggishness

While PLNG looks reasonable based on our DCF-based valuation, medium term earnings uncertainty is likely to continue to weigh on the stock. While PLNG should generate ~INR115bn of FCF over FY14-17, the FY14-16 earnings are likely to be flat and that may lead of lack of investor interest in FY14. Our TP is based on a combination EV/EBITDA and DCF; we revise our TP to INR160/sh indicating only about 15% upside over an 18-month period, implying potential under-performance vis-à-vis markets. On the other hand, with Kochi terminal very close to commissioning, we rule out significant downside from the current levels as we see only minor earnings cuts from here on.

Source : Equity Bulls

Keywords