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Petronet LNG (PLNG.BO, Neutral)
What happened
We upgrade Petronet LNG to Neutral from Sell as we now expect higher
earnings growth from increased LNG volumes due to delay in ramp-up
of domestic gas production, and higher marketing margins on spot
cargoes for PLNG.
Since we added PLNG to the Sell list on June 3, 2010, the stock has
gained 64.9% vs. a gain of 15.1% for the Sensex (last 12m: +68.6% vs.
+10.7%).
Current view
With delay in the ramp-up of D-6 gas volumes we expect demand for
imported LNG to increase from current levels resulting in higher
earnings growth for PLNG. We now expect earnings to grow +23% and
+13% in FY12E-FY13E driven by higher spot volumes and improved
marketing margins.
While we remain confident about substantial pent-up natural gas
demand in India and that gas demand growth will likely outstrip the
ramp-up in domestic gas production in the medium term, rising LNG
prices and price sensitivity of end-consumers would keep a reality check
on LNG demand, in our view. Also, gas pooling of expensive LNG with
cheaper domestic gas in order to make it more affordable would
necessitate more domestic gas volumes in the first place.
We increase our 12-m DCF-based target price to Rs135 from Rs110
earlier on account of our improved LNG demand forecast for FY12. Our
price target implies a potential downside of 1%.
Key risks
Downside: Higher LNG prices. Upside: Earlier-than expected completion
of Kochi terminal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Petronet LNG (PLNG.BO, Neutral)
What happened
We upgrade Petronet LNG to Neutral from Sell as we now expect higher
earnings growth from increased LNG volumes due to delay in ramp-up
of domestic gas production, and higher marketing margins on spot
cargoes for PLNG.
Since we added PLNG to the Sell list on June 3, 2010, the stock has
gained 64.9% vs. a gain of 15.1% for the Sensex (last 12m: +68.6% vs.
+10.7%).
Current view
With delay in the ramp-up of D-6 gas volumes we expect demand for
imported LNG to increase from current levels resulting in higher
earnings growth for PLNG. We now expect earnings to grow +23% and
+13% in FY12E-FY13E driven by higher spot volumes and improved
marketing margins.
While we remain confident about substantial pent-up natural gas
demand in India and that gas demand growth will likely outstrip the
ramp-up in domestic gas production in the medium term, rising LNG
prices and price sensitivity of end-consumers would keep a reality check
on LNG demand, in our view. Also, gas pooling of expensive LNG with
cheaper domestic gas in order to make it more affordable would
necessitate more domestic gas volumes in the first place.
We increase our 12-m DCF-based target price to Rs135 from Rs110
earlier on account of our improved LNG demand forecast for FY12. Our
price target implies a potential downside of 1%.
Key risks
Downside: Higher LNG prices. Upside: Earlier-than expected completion
of Kochi terminal.
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