Petronet LNG Ltd Play on rising LNG imports; Maintain BUY :: Religare

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Petronet LNG Ltd
Play on rising LNG imports; Maintain BUY

Petronet LNG reported a PAT of Rs 1.31bn marginally better than our
expectations primarily on account of a) marginally higher sales volume (99.8
TBTUs) than expected and b) higher other income (Rs 186 mn) on account of
FX gains of Rs 90 mn. The quarter saw higher off-take of LNG due to stagnation
in KG-D6 production and shutdown in PMT field, freeing up carrying capacity
on GAIL network and replacing unmet demand. With GAIL new pipelines likely
to get commissioned in coming quarters, LNG imports are likely to go up on
account of a) no major incremental domestic gas supplies coming in next 4-5
quarters and b) incremental gas demand from new customers and new areas.
Results marginally better than expectation: The improved profitability on QoQ
basis was largely on account of a) higher re-gasification volumes (99.8 TBTUs vs
95.1 TBTUs in Q1FY11) and b) FX gain of Rs 90 mn against FX loss of Rs 60 mn.
The increased volumes during the quarter were due to two spot LNG cargoes
(however only 1.4 cargoes are accounted in the results as second cargo was
getting processed. We expect spot LNG volumes to grow in coming quarters
(already have a visibility of 2.6 spot LNG cargoes in Q3FY11) concomitant with
GAIL’s capacity expansion by Q1FY12E.
Kochi terminal on track: The construction of Kochi terminal is ~60% complete
and on schedule to come on-line in 1QCY12. Our view is in line with the
management expectations that the demand in Kochi is expected to be robust.
Therefore, PLNG management is considering the capacity expansion of Kochi
Terminal from 2.5mmtpa to 5mmtpa (USD 100 mn).
Tendering of new jetty at Dahej by Dec 10: In order to maximize the capacity
utilization at Dahej terminal, PLNG is in process of setting up a new jetty at an
estimated capex of Rs 10 bn. The final tendering of project is expected to be over
by Dec 10 and jetty is likely to be commissioned by mid of CY13 (~30 months
for the final tendering. Once commissioned, new jetty will allow PLNG to
process ~12 MMTPA on consistent basis.
Play on LNG imports; maintain BUY with TP of Rs 165/share: PLNG is a unique
play to capture the gas deficit markets in India as the domestic demand will
continue to outstrip domestic supplies in medium to long term. The coupled with
PLNG being big beneficiary of gas pooled pricing (likely to be introduced in next
2-3 quarters) will help it to achieve higher capacity utilization at both its existing
(Dahej) and new (Kochi) terminals.