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Another strong quarter
PLNG’s 2QFY12 net profits rose 1%QoQ to Rs2.6bn and came 10% ahead of
estimates. Higher trading margins and a favourable volume mix helped. We are
upgrading FY12-14 EPS by 0-14% to factor in higher trading profits and to recast
Kochi financials to factor in commercial operations in 2HFY13. Maintain O-PF with
an upgraded target price of Rs190/sh (+15%). A favourable medium term LNG
macro due to lacklustre domestic gas production, strong EPS momentum and
additional clarity on the proposed 5mtpa capacity addition at Dahej, on term
contracts for Dahej and Kochi and the proposed East Coast terminal are catalysts.
Strong 2QFY12. PLNG’s 2QFY12 net profit rose 1%QoQ to Rs2.6bn (Rs3.5/sh) and
came 10% above estimates. While volumes (2.62mt, +1%QoQ) were inline, mix was
favourable with lower RasGas (1.75mt, flat QoQ) and regas (0.3mt, -8%QoQ) volumes
offset by higher short term and spot cargoes (0.54mt, +14%QoQ) on which PLNG
accrues trading margins. As per our calculations, trading gains on these (20.5% of
volumes in 2Q cf. 18.3% in 1Q) came in at ~US$0.7/mmbtu (flat QoQ cf. our estimate
of US$0.5) making up 23% of EPS. Lower employee costs (-4%QoQ) also helped.
Strong volume momentum. PLNG’s 2Q volumes annualised a 10.6mt; we are raising
estimates to 10.6/11mt for FY12/13 but our discussions still indicate that PLNG has
been able to run at well over 11mt in 3Q so far; efficient scheduling of ships, night
berthing and larger shiploads may have helped. Every 1mt adds Re1 (8%) to EPS.
Raising FY12-14 EPS, target. We model higher trading margins (US$0.5-0.8/mmbtu
cf. US$0.3-0.5) at Dahej and also recast Kochi financials to build in commercial
operations in 2HFY13 albeit at lower regas margins of ~Rs52/mmbtu. Overall, we now
expect Kochi to detract from earnings in FY13-14 but the upgrade to Dahej still leads
to an overall 0-14% upgrade to EPS. We also upgrade our 12-month DCF based target
price to Rs190/sh to factor in these earnings upgrades as also a roll-over to Sept-12.
An alternative earnings based SOTP indicates a higher fair value of Rs207/sh.
Buoyant outlook. Struggling domestic gas production and rising demand, even at
current spot prices, augers well for PLNG as was evident from the strong traction in
short term and spot cargoes in 2Q. This has continued in 3Q as well as underscored by
management in the post earnings conf-call. Hence, volumes should easily sustain till
the 5mtpa Kochi terminal (targeted in Oct-12) and the second jetty at Dahej (+3mtpa,
targeted in Nov-13) come on-stream driving volumes higher. Management also hopes
to finalise the terms of the 5mtpa expansion at Dahej over the coming months while it
has already completed feasibility studies of the proposed 5mtpa East Coast terminal.
Maintain O-PF. PLNG has outperformed the market by +65% in the last year but we
continue to find valuations (12x Mar13 PE) reasonable given the buoyant medium term
outlook and strong earnings traction. An earlier than expected cut in Dahej tariffs (we
model 10% cut in 2014, 5ppt = 10% EPS) and slower ramp-up at Kochi are key risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Another strong quarter
PLNG’s 2QFY12 net profits rose 1%QoQ to Rs2.6bn and came 10% ahead of
estimates. Higher trading margins and a favourable volume mix helped. We are
upgrading FY12-14 EPS by 0-14% to factor in higher trading profits and to recast
Kochi financials to factor in commercial operations in 2HFY13. Maintain O-PF with
an upgraded target price of Rs190/sh (+15%). A favourable medium term LNG
macro due to lacklustre domestic gas production, strong EPS momentum and
additional clarity on the proposed 5mtpa capacity addition at Dahej, on term
contracts for Dahej and Kochi and the proposed East Coast terminal are catalysts.
Strong 2QFY12. PLNG’s 2QFY12 net profit rose 1%QoQ to Rs2.6bn (Rs3.5/sh) and
came 10% above estimates. While volumes (2.62mt, +1%QoQ) were inline, mix was
favourable with lower RasGas (1.75mt, flat QoQ) and regas (0.3mt, -8%QoQ) volumes
offset by higher short term and spot cargoes (0.54mt, +14%QoQ) on which PLNG
accrues trading margins. As per our calculations, trading gains on these (20.5% of
volumes in 2Q cf. 18.3% in 1Q) came in at ~US$0.7/mmbtu (flat QoQ cf. our estimate
of US$0.5) making up 23% of EPS. Lower employee costs (-4%QoQ) also helped.
Strong volume momentum. PLNG’s 2Q volumes annualised a 10.6mt; we are raising
estimates to 10.6/11mt for FY12/13 but our discussions still indicate that PLNG has
been able to run at well over 11mt in 3Q so far; efficient scheduling of ships, night
berthing and larger shiploads may have helped. Every 1mt adds Re1 (8%) to EPS.
Raising FY12-14 EPS, target. We model higher trading margins (US$0.5-0.8/mmbtu
cf. US$0.3-0.5) at Dahej and also recast Kochi financials to build in commercial
operations in 2HFY13 albeit at lower regas margins of ~Rs52/mmbtu. Overall, we now
expect Kochi to detract from earnings in FY13-14 but the upgrade to Dahej still leads
to an overall 0-14% upgrade to EPS. We also upgrade our 12-month DCF based target
price to Rs190/sh to factor in these earnings upgrades as also a roll-over to Sept-12.
An alternative earnings based SOTP indicates a higher fair value of Rs207/sh.
Buoyant outlook. Struggling domestic gas production and rising demand, even at
current spot prices, augers well for PLNG as was evident from the strong traction in
short term and spot cargoes in 2Q. This has continued in 3Q as well as underscored by
management in the post earnings conf-call. Hence, volumes should easily sustain till
the 5mtpa Kochi terminal (targeted in Oct-12) and the second jetty at Dahej (+3mtpa,
targeted in Nov-13) come on-stream driving volumes higher. Management also hopes
to finalise the terms of the 5mtpa expansion at Dahej over the coming months while it
has already completed feasibility studies of the proposed 5mtpa East Coast terminal.
Maintain O-PF. PLNG has outperformed the market by +65% in the last year but we
continue to find valuations (12x Mar13 PE) reasonable given the buoyant medium term
outlook and strong earnings traction. An earlier than expected cut in Dahej tariffs (we
model 10% cut in 2014, 5ppt = 10% EPS) and slower ramp-up at Kochi are key risks.
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