Buy Petronet LNG - Stretched operable capacity at 11.0 mtpa; Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Petronet LNG (PLNG IN, INR 155, Buy)

We believe that Petronet LNG (PLNG) is frequently importing ~11.0mtpa LNG in H2FY12, higher than ~10.5mtpa clocked in Q2FY12. To incorporate higher volume, we have increased our FY12E import volume from 10.46mtpa to 10.60mtpa while maintaining FY13E import volume at 10.90mtpa. Changes in FY12/13 import mix in favour of self and third party cargo have led to higher blended marketing margins of ~USD0.32/mmbtu. Collectively, this has resulted in an increase of 3.9%/2.6% in our FY12/13 EPS estimates. Maintain ‘BUY’ and TP of INR194/share. PLNG remains our favourite in the O&G mid-cap segment.

Hiking FY12E import volume to 10.60 mtpa (vs 10.46 mtpa)

Based on our discussion with the PLNG management, we believe that the company has been clocking ~11.0mtpa (run-rate) of LNG imports so far. This is clearly a positive as PLNG’s H2FY12 import volume will be higher than those estimated by ourselves as well as consensus. To account for higher volume in H2FY12, we are increasing our FY12E import volume to 10.6mtpa (10.46mtpa earlier) while maintaining FY13E volume at 10.9mtpa. Most of this incremental LNG, we believe, is being supplied to price-insensitive sectors like industrials and CGD.

Blended FY12E marketing margins at USD0.32/mmbtu

Along with changes in total volume, we have also revised our sales mix in favour of self and third party spot volume (34.0% against 32.4% earlier) for FY12E. This has led to an improvement in profitability since PLNG earns marketing margins along with re-gasification charges on the same. We peg FY12/13 blended marketing margins at ~USD0.32/ mmbtu.

Outlook and valuations: Positive on volume; maintain ‘BUY’

We are revising our FY12E and FY13E EPS to INR13.7 and INR14.0 (INR 13.2, INR13.6 earlier) to include higher volume and operating leverage (low internal consumption). However, we are maintaining our DCF based TP at INR194, upsides to which will come from: (a) possible benefits of Section 80IA IT benefit and (b) valuation of a 26% stake in Dahej solid cargo port. We maintain our ‘BUY/Sector Outperformer’ rating on the stock. At CMP of INR155, PLNG trades at 11.3x/11.1x our FY12E/FY13E EPS. Start of Kochi terminal could be a trigger for the stock.