Concerns over potential regulation overblown: Currently, there is no
regulation for LNG terminals in India. However, our analysis of the various
regulations across geographies highlights the fact that some of the
concerns over the potential third-party access of new LNG terminals or
expanded capacity is exaggerated. International countries have
increasingly been more liberal towards regulation of the LNG terminals.
Dwindling domestic production unlikely to lower LNG intake capacity:
Likely take-or-pay agreement for all the incremental Dahej expansion
would reflect Dahej terminal’s first-mover advantage in a scenario of
tighter domestic gas supplies. This, coupled with opening of newer
demand centres on account of newer pipelines, likely reforms in key user
industries (led by fertilizer) and likely upward revision of the domestic gas
prices would put to rest concerns over utilization of the upcoming
incremental capacity at Dahej.
Outlook: PLNG’s utility nature of business (stable regasification margins
and term contracts), low regulatory risks and expanding volumes on
account of strong demand estimates, hold it in good stead. We believe
that the concerns over the regulatory intervention on the marketing
margin front as well as PNGRB regulating regasification charges are
exaggerated. We recommend ‘BUY’ on the stock with target of
Rs176/share.
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