Petronet LNG Volume growth drives earnings; maintain Buy :: Anand Rathi

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Petronet LNG
Volume growth drives earnings; maintain Buy


 Volume growth drives earning. Petronet LNG (PLNG) reported net
profit of `1,311m (up 18% qoq), beating our expectation of `1,255m,
chiefly due to higher spot purchases and lower operating costs.
Volumes were up 5% qoq as PLNG imported four spot cargoes in the
quarter taking advantage of the shutdown in gas production at the
PMT fields. Commissioning of GAIL’s expanded HVJ pipeline by end-
FY11 would aid volume growth in the long term.
 Opex down on greater internal efficiencies. During the quarter,
opex was `30m lower than the historical trend owing to lower fuel
consumption due to greater operational efficiencies. Management
expects the decline in opex to be permanent as it has occurred on
account of greater efficiency on the doubling of the Dahej capacity.
 Earnings growth to continue. Although we reduce our FY11e
earnings 8% owing to lower volumes assumed (at 8.3mtpa from
8.6mtpa earlier), our FY12e earnings remains unchanged. We
introduce FY13e earnings and expect 22% earnings CAGR during
FY10-16e on the back of growth from increasing volumes and higher
re-gas charges. We expect re-gas charges to rise 5% every year.
 Valuation. We raise our DCF-based target price to `140/share (from
`120) as we account for the greater operational efficiency; we roll
forward our valuation to Sep ’11. The key stock trigger would be the
commissioning of GAIL’s expanded HVJ pipeline by end-FY11. We
believe global LNG oversupply, relatively benign pricing including
possible pooling of gas, easing pipeline constraints and no large new
domestic gas supplies till ’14 to be positive. Risks: Lower re-gas
charges and volumes.