Maintain Buy on Petronet LNG - Motilal Oswal

Petronet LNG (PLNG IN; Mkt Cap USD2.1b, CMP Rs123, Buy)

In a sweet spot

To benefit from delay in KG-D6 ramp-up, growing demand for LNG imports

After reaching 60mmscmd, RIL's KG-D6 production has been on a decline. Production is currently ~52mmscmd and is unlikely to increase before March 2012.

This has created a strong case of increase in LNG imports, with an immediate likely demand of at least 8mmscmd.

Gas surplus situation in the US, led by shale gas emergence has resulted in over capacity in the LNG market and will keep international LNG prices soft.

Although India's domestic gas supply is likely to post 16% CAGR over FY10-14, the country will still be gas deficient.

We expect Petronet's Dahej terminal to post 12% volume CAGR to 12.5mmtpa (50mmscmd) by FY14.

Kochi terminal construction is on track and is scheduled to be completed by 4QFY12. Commissioning is expected in 1QFY13. We currently model throughput of 10/11.8mmtpa in FY12/FY13 for Petronet (Dahej + Kochi). The stock trades at 13.1x FY12E EPS of 9.4 and 10.8x FY13E EPS of Rs11.4. We value Petronet LNG at Rs150/share - the average of the results of two valuation methodologies (1) P/E (13x FY13E EPS, Rs160/share), and (2) DCF (Rs140/share). Maintain Buy.

Source : Equity Bulls

Keywords