Angel Broking recommends Neutral on Petronet LNG - 4QFY2014Result Update

For 4QFY2014, Petronet LNG (PLNG) reported a decline in net profit due to lower volumes and full capitalization of Kochi terminal. We recommend a Neutral rating on the stock.

Volumes fall 4.1% yoy: During 4QFY2014, PLNG's R-LNG volumes decreased 4.1% yoy to 117TBTUs. The contractual volumes stood at 92TBTUs, while spot cargos were 21TBTUs and the service cargos of GAIL and GSPC stood at 4TBTUs. However, the company's net sales grew by 23.2% yoy to Rs. 10,428cr due to higher prices of LNG during the quarter.

Higher interest and depreciation for Kochi drags PAT: The cost of re-gasified LNG increased by 24.2% yoy to Rs. 9,934cr. This resulted in EBITDA declining by 11.0% yoy to Rs. 387cr. Other income grew by 51.9% yoy to Rs. 31cr. However, interest and depreciation expenses increased by 218.3% and 113.7% yoy to Rs. 79cr and Rs. 100cr, respectively, due to capitalization of Kochi terminal. Consequently, the net profit declined by 30.9% yoy to Rs. 169cr.

2nd Jetty at Dahej commences operations: The company has started operations at the 2nd jetty in Dahej from April 2014. However, the Kochi terminal continues to operate at very low utilization level due to the Kochi-Mangalore pipeline issue which is still unresolved.

Outlook and valuation: PLNG is well-poised to benefit from the gas demandsupply mismatch in the country over the long term. It has also lined up aggressive capex plans to increase capacity over the coming three-four years. However earnings growth is likely to suffer in the coming one year on account of lower utilization levels at its recently commenced Kochi terminal and the stock has seen a sharp run up in the past couple of months. Hence, the current valuation at 10.7x FY2016 PE is fair in our view. Hence we recommend a Neutral rating on the stock.

Shares of PETRONET LNG LTD. was last trading in BSE at Rs.145.15 as compared to the previous close of Rs. 145.05. The total number of shares traded during the day was 206917 in over 4876 trades.

The stock hit an intraday high of Rs. 149.8 and intraday low of 144.95. The net turnover during the day was Rs. 30251454.

Source : Equity Bulls

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