Result Update: Petronet LNG Ltd - BUY - TP Rs.267 - Kotak

All is well: Strong operating performance is backed by higher RLNG off-take from both Dahej and Kochi terminals, contractual escalation in tariffs and better operational efficiency. The company has bid for seven city gas licenses and expects city gas foray to boost Kochi LNG plant capacity usage. We expect robust near-term growth as Kochi ramps up and Dahej expands nameplate capacity by 8%.

Key Highlights

- PLNG's Q1FY19 result is better than our expectation. PAT for Q1FY19 was at Rs.5.87 bn up 12% qoq on account of higher volumes and better efficiency in operations. The Company reported quarterly EPS of Rs.3.91.

- In Q1FY19, PLNG's Dahej terminal operated higher at 111% of its name plate capacity and processed LNG quantities of 214 TBTUs, 3% qoq and 16% yoy. Similarly, Kochi terminal supplied 6 TBTUs of LNG, marginally better qoq basis, with utilization increasing to 10% in Q1FY19 from 9% in Q4FY18. We expect short-term volumes to increase in the near term led by higher off-take from BPCL's Kochi refinery (from ~2 mmscmd to 2.7 mmscmd).

- Expansion Plans: The company has submitted a plan to build 7.5 mmtpa terminal in Bangladesh with an investment of ~US$ 1 bn.

- Dahej capacity expansion from 15.0 mmtpa to 17.5 mtpa is expected to be completed by June 2019.

- The Company has reiterated that Kochi pipeline would be commissioned by Dec'18.

Valuation & outlook

- We expect PLNG to report an EPS of Rs.16.1/18.6 for FY19E/FY20E, respectively. At CMP, we believe that the stock is attractively valued at 12.4x FY20E earnings. We recommend BUY (earlier ACCUMULATE) rating on the stock with a revised price target of Rs.267/- including equity value of 26% stake in Dahej Port. We expect FY19E to be better driven by acceleration in volume growth, supported by expansion.

Shares of PETRONET LNG LTD. was last trading in BSE at Rs.230.5 as compared to the previous close of Rs. 233.95. The total number of shares traded during the day was 108034 in over 1527 trades.

The stock hit an intraday high of Rs. 236 and intraday low of 229.75. The net turnover during the day was Rs. 25008937.