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Petronet LNG (PLNG.BO) Rs153.15
Equity Research
First Take: 1Q results above expectations on high marketing margin
News
Petronet LNG (PLNG) reported 1QFY12 PAT of Rs 2.6 bn, up 130% yoy,
ahead of our estimate and Bloomberg consensus of Rs 1.8/1.9 bn,
respectively. The earnings surprise was largely driven by higher-thanexpected marketing margins of around US$0.40/mmBtu and higher sales
volumes of 133 TBTUs (up 40% yoy). Capacity utilization during the quarter
was 105% with continued strong demand for LNG as domestic gas
volumes continue to disappoint. In the post-earnings call, PLNG mentioned
plans to expand its existing capacity, with 5mt capacity addition at Dahej
and a greenfield project on the East Coast. The Dahej expansion is likely to
come onstream in FY15 with total capex of around US$500 mn. PLNG also
mentioned that the equity investment for this project will likely come from
major customers, GAIL and GSPL, which will be adjusted for in long-term
re-gasification charges. The feasibility study for the 5mt project on the East
Coast is likely to start in coming months and the project is likely to take
about four years after the study is completed.
Analysis
We view PLNG as a direct play on strong demand for imported LNG over
the medium term given the delay in the ramp-up of D-6 gas volumes. While
the earnings surprise has largely been from super-normal marketing
margins, which we believe may not be sustainable over the longer term,
we believe PLNG shares are benefiting from the lack of clarity on domestic
gas volumes. Although we remain confident about the substantial latent
natural gas demand in India from non-priority sectors with low price
elasticity of demand, LNG demand from big sectors like power is still
unclear. Moreover, we believe volume growth from new terminals is likely
to come at a lower ROE than that of Dahej due to higher capex.
Implications
We put our earnings, target price, and rating for PLNG under review
following the better-than-expected 1Q results.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Petronet LNG (PLNG.BO) Rs153.15
Equity Research
First Take: 1Q results above expectations on high marketing margin
News
Petronet LNG (PLNG) reported 1QFY12 PAT of Rs 2.6 bn, up 130% yoy,
ahead of our estimate and Bloomberg consensus of Rs 1.8/1.9 bn,
respectively. The earnings surprise was largely driven by higher-thanexpected marketing margins of around US$0.40/mmBtu and higher sales
volumes of 133 TBTUs (up 40% yoy). Capacity utilization during the quarter
was 105% with continued strong demand for LNG as domestic gas
volumes continue to disappoint. In the post-earnings call, PLNG mentioned
plans to expand its existing capacity, with 5mt capacity addition at Dahej
and a greenfield project on the East Coast. The Dahej expansion is likely to
come onstream in FY15 with total capex of around US$500 mn. PLNG also
mentioned that the equity investment for this project will likely come from
major customers, GAIL and GSPL, which will be adjusted for in long-term
re-gasification charges. The feasibility study for the 5mt project on the East
Coast is likely to start in coming months and the project is likely to take
about four years after the study is completed.
Analysis
We view PLNG as a direct play on strong demand for imported LNG over
the medium term given the delay in the ramp-up of D-6 gas volumes. While
the earnings surprise has largely been from super-normal marketing
margins, which we believe may not be sustainable over the longer term,
we believe PLNG shares are benefiting from the lack of clarity on domestic
gas volumes. Although we remain confident about the substantial latent
natural gas demand in India from non-priority sectors with low price
elasticity of demand, LNG demand from big sectors like power is still
unclear. Moreover, we believe volume growth from new terminals is likely
to come at a lower ROE than that of Dahej due to higher capex.
Implications
We put our earnings, target price, and rating for PLNG under review
following the better-than-expected 1Q results.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
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