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1QFY12 net profit was 24% above our expectations with rising LNG demand driving both
volumes and margins. The CAG report is likely to delay the development of domestic gas
resources, keeping LNG demand buoyant. We raise our FY12-14F EPS 10-20%. Buy maintained
with a new Rs190 TP (up from Rs160).
Record profits in 1QFY12
PLNG reported 1QFY12 net profit of Rs2.6bn (up 130% yoy), 24% above our expectations.
Volumes at 133.37tbtu were up 40% yoy and 2% above our expectations, though product mix
was better (lower Ras Gas volumes which earn no marketing margin). Most of the earnings
upside was due to lower internal consumption and higher marketing margins. Management
indicated that the marketing margins on account of the 1.5mt medium-term contract was fixed
(and hence sustainable). Actual volumes processed in June gives an indication of the volume
upside potential in FY12/13 (11.5mt vs our estimate of 10.55mt).
Macro environment is improving for LNG
Current robust LNG demand has materialised due to a slide in KG-D6 gas production, but we
believe this strong demand environment could sustain over the next five years. The draft
comptroller and auditor general (CAG) report, which audited select production sharing contracts
(PSC), questions past decisions of the upstream regulator (DGH) and the petroleum ministry.
While we are unable to predict the ultimate outcome of the audit, we expect delays in investment
approvals for new development plans to limit the growth in domestic gas production, thereby
improving prospects for LNG. PLNG’s plans to expand Dahej by a further 5mt to 17.5mt and
explore the feasibility of a new 5mt terminal on the east coast, though not unexpected, should be
seen in this context.
Buy maintained: TP Rs190
We have raised our FY12-14F EPS by 10-20% and maintain our Buy rating. We still value PLNG
in line with other power/gas utilities (13x FY13F EPS) and raise our target price to Rs190 in line
with the increase in EPS. Recent developments provide greater comfort on PLNG’s long-term
volume prospects which could provide further upside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 net profit was 24% above our expectations with rising LNG demand driving both
volumes and margins. The CAG report is likely to delay the development of domestic gas
resources, keeping LNG demand buoyant. We raise our FY12-14F EPS 10-20%. Buy maintained
with a new Rs190 TP (up from Rs160).
Record profits in 1QFY12
PLNG reported 1QFY12 net profit of Rs2.6bn (up 130% yoy), 24% above our expectations.
Volumes at 133.37tbtu were up 40% yoy and 2% above our expectations, though product mix
was better (lower Ras Gas volumes which earn no marketing margin). Most of the earnings
upside was due to lower internal consumption and higher marketing margins. Management
indicated that the marketing margins on account of the 1.5mt medium-term contract was fixed
(and hence sustainable). Actual volumes processed in June gives an indication of the volume
upside potential in FY12/13 (11.5mt vs our estimate of 10.55mt).
Macro environment is improving for LNG
Current robust LNG demand has materialised due to a slide in KG-D6 gas production, but we
believe this strong demand environment could sustain over the next five years. The draft
comptroller and auditor general (CAG) report, which audited select production sharing contracts
(PSC), questions past decisions of the upstream regulator (DGH) and the petroleum ministry.
While we are unable to predict the ultimate outcome of the audit, we expect delays in investment
approvals for new development plans to limit the growth in domestic gas production, thereby
improving prospects for LNG. PLNG’s plans to expand Dahej by a further 5mt to 17.5mt and
explore the feasibility of a new 5mt terminal on the east coast, though not unexpected, should be
seen in this context.
Buy maintained: TP Rs190
We have raised our FY12-14F EPS by 10-20% and maintain our Buy rating. We still value PLNG
in line with other power/gas utilities (13x FY13F EPS) and raise our target price to Rs190 in line
with the increase in EPS. Recent developments provide greater comfort on PLNG’s long-term
volume prospects which could provide further upside.
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