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Petronet LNG Ltd
Utilization rate still low at 80%
but hope of rise from 4Q FY11
Raise PO by 18% to Rs66 but retain Underperform
Profit of Petronet LNG (PLNG) is up 9% YoY in 2Q FY11 and 8% YoY in 1H
FY11. However, utilization rate on 10mmtpa capacity continues to be 80% in 2Q
FY11 though it is up from 76% in 1Q. Utilization rate is thus just 43% on
3.5mmtpa capacity added in FY10. Delay in KG D6 gas ramp up and large new
demand expected in 1H 2011 gives hope of improved utilization from 4Q FY11.
We have raised PLNG’s PO by 18% to Rs66 as we have raised PLNG’s regas
charge (conservative earlier) and volume assumptions beyond FY13E. Revised
PO still implies 46% potential downside. PLNG also is expensive at 13.5-13.8x
FY12-FY13E. We retain underperform on PLNG.
2Q profit up 9% YoY on higher regas charge & lower cost
PLNG’s 2Q net profit at Rs1.3bn is 9% YoY higher driven by 92% YoY higher
regas charge on the low base of 2Q FY10. Regas charge was very low in 2Q
FY10 due to loss or low charge on a short term LNG contract. Higher regas
charge has made up for 12% YoY decline in regas volume. Staff cost, operating
and other expenses in 2Q FY11 are 30% QoQ and 8% YoY lower. 2Q profit is 5%
higher than our expectation. Lower than expected staff cost, opex and higher than
expected other income explains the earnings surprise. YoY profit growth is likely
to be higher in 2H FY11E on lower base. 2H FY10 profit was 19% lower than 1H.
KG D6 ramp up delay may improve utilization from 4Q FY11
LNG demand in India was hit by start of KG D6 gas output in April 2009 and its
ramp up to 60mmscmd by early 2010. Several spot LNG consumers switched to
KG D6 gas from late-2009 or early-2010. However the outlook for LNG demand
may improve with RIL indicating that ramp of KG D6 gas to 80mmscmd would be
delayed. 25mmscmd of gas demand is expected to emerge in 1H 2011, which
would have to be met by LNG due to KG D6 gas ramp up delay.
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