Petronet LNG - Q4FY13 Result Update - Sushil Finance

Petronet LNG Ltd. (PLL) has reported slightly disappointing set of numbers for the quarter ended March'13 wherein PAT was flattish YoY whereas it de-grew by ~23% sequentially to Rs.2,452 mn. We attended the conference call of the company and following are the key highlights of the results which are summarized below:

Key Highlights of Q4FY13 & FY13 results

- Revenues grew by 33% YoY to Rs.84,656 mn which was mainly on back of higher LNG prices whereas volumes declined by ~9% YoY to 122 tbtu's in Q4FY13. Drop in volumes was majorly on back of lower Re-Gas volumes which declined by ~75% to 4 tbtu's on account of higher spot prices in Jan-Feb (~$17-18/mmbtu), thus affecting gas demand. Volumes in FY13 dipped marginally to ~523 tbtu's v/s 548 tbtu's in FY12. However with easing LNG prices (~$14-15/mmbtu), the management has indicated improving utilizations compared to Q4FY13.

- Lower volumes coupled with higher operating expenses led to lower operating profit growth which grew marginally by 3% YoY to Rs.4,344 mn in Q4FY13, while margins declined by 150 bps to 5.1%. In FY13, operating profit grew by ~6% to Rs.19,387 mn while margins stood at 6.2% v/s 8.1% in FY12. Net profit in Q4FY13 & FY13 stood at Rs.2452 mn (flat YoY) & Rs.11,493 mn (up 9%) respectively.

- Delay in commissioning of projects to impact volumes: Commissioning of both the projects has got further delayed by ~3 months with Kochi & Dahej (2nd Jetty) now expected to come on-stream by July'13 & April'14 respectively. Delay in pipeline connectivity & readiness of customers has resulted in further delay for Kochi terminal. Management expects lower utilization levels (~10-15%) at Kochi for initial 2 years, since phase-II expansion of pipeline network connecting major consumers is expected to get commissioned by Dec'14. Considering the delays & ramp-up constraints in Kochi, we have lowered down our volumes estimates for FY14E & FY15E by ~3% & 5% respectively.

- Dahej & Gangavaram expansions to come on-stream by 2016-17: Company plans to increase its name-plate capacity at Dahej & Gangavaram by 5 MMTPA each, thus taking the total name-plate capacity to ~25 MMTPA by 2016-17. Preliminary work for both the projects has begun while EPC contracts for Dahej are likely to be awarded shortly. However, considering the long-gestation period, we have not factored in any revenue flows from these expansions.

- Higher Re-Gas charges at Kochi – 'a positive surprise': Management has indicated for Re-Gas charges at Kochi at Rs.62/mmbtu, higher compared to its initial guidance of ~Rs.50-55/mmbtu. However, the same would be reviewed post ramp-up in utilization levels going ahead.

OUTLOOK & VALUATION

Considering the project delays & under-utilization of Kochi terminal (resulting in high interest & depreciation), we expect earnings to be subdued over the next 2 years. However strong domestic gas demand coupled with huge ongoing capex plans provides strong volume growth visibility over the long term. Hence, considering the sound business model, volume growth visibility over the long term coupled with healthy financials, we maintain our positive outlook on the stock & recommend 'BUY' with a revised price target of Rs.178 based on DCF methodology.

Source : Equity Bulls

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