Petronet LNG Ltd - Q4FY14 Update-CMP Rs.145, Rating Changed to HOLD, Target increased to Rs.152 - Sushil Finance

Petronet LNG Ltd. (PLL) has reported decent set of numbers for the quarter ended March'14 which were slightly better than expectations. We attended the conference call of the company and following are the key highlights of the results:

Key Highlights of Q4 & FY14 results

- Lower volumes coupled with higher interest & depreciation charges due to capitalization of Kochi terminal resulted in net profit de-growth of ~31% YoY whereas sequentially it was up by ~25% on back of better marketing margins. Net Profit for FY14 de-grew by ~38% YoY to Rs.7120 mn while NPM were at 1.9% v/s 3.7%. EPS for FY14 stood at Rs.9.5 v/s Rs.15.3.

- Sluggish demand at higher LNG prices resulted in marginally lower volumes. In Q4 volumes stood at 117 tbtu's down ~5% YoY & QoQ on lower regas volumes while in FY14 volumes were down by ~6% to 493 tbtu's. Dahej utilization was lower at ~96%. Management expects better volumes in FY15 (~10.5 MT) on back of (1) Commissioning of 2nd jetty on 18th April'14 & (2) PLNG entering into new short term deal of ~0.8 MT for FY15.

- Kochi volumes for Q4 were almost negligible at ~1 tbtu (Q3 - 3.4 tbtu's) mainly on back of no off-take from FACT during the quarter. However management expects FACT to resume volumes from FY15 & expects 5% utilization levels in FY15. Connectivity stills remains an issue & mgmt has not defined any timeline for the same, however they expect atleast a year for further ramp-up at Kochi. PBT loss at Kochi for FY14 came in at ~Rs.2.5 bn (Interest – Rs.1.1 bn; Depreciation – Rs.1.2 bn).

- Dahej Update - With new jetty coming on-stream, the long-term arrangement with GSPC for 1.25 MT regas capacity has commenced (on take-or-pay basis). Apart from this, Gail has also committed ~1 MT on similar basis for FY15, thus providing better volume visibility at Dahej over the next 1 year (7.5 MT Ras Gas + 1.25 MT GSPC + 1 MT Gail + 0.8 MT New Deal = 10.5 MT).

- Dahej expansion of 5 MT is on track & likely to get completed by Nov'16 while Gangavaram terminal is in planning phase with almost all major approvals in place. Spot prices have eased post-winter (~$14-15) & management expects prices to remain stable over next 4-5 months. Ras Gas prices at the end of FY14 were ~$12.5 & expect the same to cross ~$13 in FY15E.

OUTLOOK & VALUATION

Lower volumes due to sluggish demand coupled with likely prolonged under-utilization of Kochi terminal remains the major overhang for the company in near future. Relatively better volume visibility at Dahej due to commencement of jetty & new short-term arrangements provides some respite in FY15E. With no major trigger in offing in near term, we expect stock to underperform & hence recommend 'HOLD' with a revised price target of Rs.152. However, considering PLNGs leadership position, strong execution track record & long-term volume visibility, we remain optimistic on the long-term growth prospects of the Company.

Shares of PETRONET LNG LTD. was last trading in BSE at Rs.162.35 as compared to the previous close of Rs. 163.95. The total number of shares traded during the day was 114515 in over 3545 trades.

The stock hit an intraday high of Rs. 165.45 and intraday low of 160.95. The net turnover during the day was Rs. 18735997.

Source : Equity Bulls

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