UBS: Petronet LNG Favourable results – medium term catalysts

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UBS Investment Research
Petronet LNG
Favourable results – medium term catalysts
􀂄 Spot cargoes of ~3.5 boost 3Q11 results
Petronet LNG (PLNG) reported favourable results, as it sold ~3.5 spot cargoes,
equivalent to ~11.14 tbtu. In 3Q11, PLNG also provided regas services to
GAIL/GSPL for 8.6 tbtu of LNG. Term sales were 100 tbtu, taking total 3Q11
sales volumes to 119.7 tbtu (2.3 MMTPA). 9MFY11 sales are 6.05 MMTPA.

􀂄 Net income grows favourably 105.3% Y-o-Y and 30.3% Q-o-Q
PLNG’s realisation was Rs 6.76/scm (up 33.7% Y-o-Y), EBITDA was Rs
0.64/scm (up 37% Y-o-Y) and PAT at Rs 0.32/scm (up 69.9% Y-o-Y). PLNG did
not indicate its marketing margin. We estimate ~US$0.1/mmbtu. Net income grew
105.3% Y-o-Y and 30.3% Q-o-Q to Rs 1.71 bn.
􀂄 PLNG sources 1.1 MMTPA LNG for FY12/13E; a positive
PLNG has sourced an additional 1.1 MMTPA for FY12/13E, partly to be marketed
through existing off-takers and the rest directly to end consumers (this mitigates
our concerns on sourcing). PLNG expects Kochi 5 MMTPA capacity and Dahej
jetty to be commissioned by 3QFY13 and 2QFY14, respectively.
􀂄 Valuation: Growth support valuation; Buy rating, price target of Rs150.00
We believe medium term catalysts like gas supply constraints, latent demand, and
new GAIL pipelines expand PLNG’s potential to push more spot/term sales. LNG
sourcing mitigates our concerns over sourcing and PLNG is to scout for more term
supply. We maintain a Buy rating, our estimates and PT of 150 (based on UBSVCAM).
PLNG trades at P/E of 15.0x and P/BV of 3.1x on FY12 estimates. There
is a results conference call tomorrow at 12:30 PM IST (afternoon), during which
we hope to receive more details.


Petronet LNG
Petronet LNG (PLNG) is a joint venture company set up by the government of
India to establish LNG import and regasification facilities. It is primarily a
converter or tolling company. Anticipating the larger role of natural gas supply
in meeting the energy needs of Indian consumers, the Indian government
approved on 4 July 1997 the formation of a joint venture with equity
participation from ONGC, GAIL, Indian Oil, and BPCL at a 12.5% stake for
each. GDF (also known as Gaz de France), which holds another 10% of the
company, is also a strategic partner of the company.
􀁑 Statement of Risk
Petronet LNG buys LNG on long- and short-term contracts, regasifies it and
sells it to the off-takers. Any increase in the input LNG prices due to delay in
liquefaction projects would lead to an increase in the R-LNG ex-terminal prices
and could pose a risk to its utilisation rates or the regasification margins. The
company is expanding its existing capacity and also planning a new terminal.
Both of these involve execution risk.