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The Q4FY12 results of Petronet LNG (PLNG) were below our estimates primarily on account of
lower than expected regassification volume. In Q4 FY12, the PAT increased 18.8% Y-o-Y but
declined 16.9% sequentially to Rs. 2.5 bn as against our expectations of Rs. 2.8 bn. For the
quarter, the net sales increased 59.9% Y-o-Y and 0.7% sequentially to Rs. 63.8 bn driven by
increase in volume and LNG prices.
Lower than expected volumes mars the results
As against our expectation of 147.4 TBTU of regassification volume the company regassified
134.9 TBTU. The sequential decline in regassification volume was on account of lesser off take
from some fertilizer plants due to normal maintenance shut downs and lower demand from
power plants. The long term volume declined 5.4% Y-o-Y and 4.6% sequentially to 93.5 TBTU
while the tolling volume increased 10.4% Y-o-Y but declined 31.6% sequentially to 15 TBTU.
PLNG's 7.5 mmtpa long term contract are on take or pay basis so the volume is likely to pick up
in the coming quarters.
Gross margin declines as capacity utilizations comes down
The gross margin of the company came below expectations as the capacity utilization of the
plant came down from ~ 115% in Q3 FY12 to ~106% in 4Q FY12, thus, impacting the efficiencies
gains and a likely lower than expected marketing margin on the spot/short term cargoes. The
increase in the spot LNG prices could put pressure on the company's ability to charge higher
marketing margins.
PLNG will continue to benefit from the fall in the domestic gas production
With the domestic gas production on decline amid strong gas demand, LNG will hold key to
plug the demand- supply deficit. PLNG already operates its Dahej terminal over 100% capacity
utilization. The management maintained that the demand in Dahej region remains strong but
the company is unable to meet the entire requirement on account of the capacity constraints.
To cater to the demand, PLNG is increasing the Dahej plant capacity to 15 mmtpa. PLNG
could operate the Dahej plant at a regassification capacity of 12.-12.5 mmt once the second
jetty opens by FY14. Also, Kochi terminal is on track and is likely to get operational by the end
of CY2012.
Valuations
We cut our FY13E and FY14E regassification volume assumption downwards at the Dahej
terminal to 10.7 mmt and 11.4 mmt factoring in the lower capacity utilization. We lower our
FY13E and FY14E EPS estimates to 13.1 and 15.1 respectively as against the earlier estimates of
14.9 and 15.8 respectively, to factor in the lower than expected capacity utilization at the
Dahej terminal. The uncertainty over the regulation of LNG business (regassification and
marketing margin) has led to the recent correction in the stock price. However the management
reiterated that the LNG business does not fall under the purview of the regulator and, hence,
the concerns are unwarranted. At CMP, PLNG is trading at 10.3x FY13E and 9.0x FY14E EPS of
Rs. 13.1and Rs. 15.1 respectively and at an EV/EBIDTA of 7.5x FY13E and 5.9x FY14E. We
maintain buy rating on PLNG with a revised DCF based target price of Rs.195 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Q4FY12 results of Petronet LNG (PLNG) were below our estimates primarily on account of
lower than expected regassification volume. In Q4 FY12, the PAT increased 18.8% Y-o-Y but
declined 16.9% sequentially to Rs. 2.5 bn as against our expectations of Rs. 2.8 bn. For the
quarter, the net sales increased 59.9% Y-o-Y and 0.7% sequentially to Rs. 63.8 bn driven by
increase in volume and LNG prices.
Lower than expected volumes mars the results
As against our expectation of 147.4 TBTU of regassification volume the company regassified
134.9 TBTU. The sequential decline in regassification volume was on account of lesser off take
from some fertilizer plants due to normal maintenance shut downs and lower demand from
power plants. The long term volume declined 5.4% Y-o-Y and 4.6% sequentially to 93.5 TBTU
while the tolling volume increased 10.4% Y-o-Y but declined 31.6% sequentially to 15 TBTU.
PLNG's 7.5 mmtpa long term contract are on take or pay basis so the volume is likely to pick up
in the coming quarters.
Gross margin declines as capacity utilizations comes down
The gross margin of the company came below expectations as the capacity utilization of the
plant came down from ~ 115% in Q3 FY12 to ~106% in 4Q FY12, thus, impacting the efficiencies
gains and a likely lower than expected marketing margin on the spot/short term cargoes. The
increase in the spot LNG prices could put pressure on the company's ability to charge higher
marketing margins.
PLNG will continue to benefit from the fall in the domestic gas production
With the domestic gas production on decline amid strong gas demand, LNG will hold key to
plug the demand- supply deficit. PLNG already operates its Dahej terminal over 100% capacity
utilization. The management maintained that the demand in Dahej region remains strong but
the company is unable to meet the entire requirement on account of the capacity constraints.
To cater to the demand, PLNG is increasing the Dahej plant capacity to 15 mmtpa. PLNG
could operate the Dahej plant at a regassification capacity of 12.-12.5 mmt once the second
jetty opens by FY14. Also, Kochi terminal is on track and is likely to get operational by the end
of CY2012.
Valuations
We cut our FY13E and FY14E regassification volume assumption downwards at the Dahej
terminal to 10.7 mmt and 11.4 mmt factoring in the lower capacity utilization. We lower our
FY13E and FY14E EPS estimates to 13.1 and 15.1 respectively as against the earlier estimates of
14.9 and 15.8 respectively, to factor in the lower than expected capacity utilization at the
Dahej terminal. The uncertainty over the regulation of LNG business (regassification and
marketing margin) has led to the recent correction in the stock price. However the management
reiterated that the LNG business does not fall under the purview of the regulator and, hence,
the concerns are unwarranted. At CMP, PLNG is trading at 10.3x FY13E and 9.0x FY14E EPS of
Rs. 13.1and Rs. 15.1 respectively and at an EV/EBIDTA of 7.5x FY13E and 5.9x FY14E. We
maintain buy rating on PLNG with a revised DCF based target price of Rs.195 per share.
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