Petronet LNG - Nirmal Bang Institutional

- Petronet LNG reported net profit of Rs2,225mn for 1QFY14 compared to Bloomberg consensus estimate of Rs2,656mn and our estimate of Rs2,631mn.

- The profit was below expectations on account of: (1) Higher tolling volume, (2) Lower spot market volume, (3) Reduced marketing margin on lower spot volume, and (4) Higher captive consumption of gas.

- However, we have retained our Buy rating on the stock with a revised target price of Rs164 from Rs178 earlier to reflect: (1) The stock pricing in ~20% capacity utilisation in perpetuity, although we believe the Kochi-Bangalore-Mangalore pipeline project would be delayed by 6-12 months, with slim chances of GAIL (India) shelving Tamil Nadu portion of the project, (2) Incremental volume post commissioning of second jetty at Dahej terminal driving EPS expansion from FY15E onwards and offsetting capitalisation/interest cost impact of Kochi terminal, (3) The valuation quite attractive at 7.4x FY15E earnings and 1.4x P/BV, (4) Even in a worst-case scenario, where all concerns are realised, we expect only a 5.4% downside from the current market price, and (5) Reduction in our EPS estimates by 9%/2% for FY14E/FY15E, respectively.

Source : Equity Bulls

Keywords