Petronet LNG -Another good result – raising TP ::Nomura research

Another good result – raising TP
Another upgrade; capacity add
of ~80% in FY14F to drive
growth from FY15F; Buy

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Action: Another solid quarter; raise earnings and TP to INR225
PLNG reported another strong quarterly result for 3QFY13, driven by
marketing/efficiency gains. EPS of INR4.25 beat Bloomberg consensus/
our estimate by 7%/9%. Capacity utilisation remains high at 110% and
earnings will likely get better in 4QFY13 given the increase in the re-gas
tariff from 1 Jan. With reported 9M EPS at INR12.1, FY13 EPS will likely
easily exceed INR16. We revise our FY13F EPS forecast to INR16.3. We
think the street (Bloomberg consensus is at INR14.8) will follow. We view
PLNG as a key stock to play the rising LNG import story. With the stock at
10x trailing P/E, valuation is undemanding, in our view. Maintain Buy.
Catalysts: 80% cap add in FY14; Kochi in 1Q and Dahej 2nd jetty in 4Q
The new 5mmtpa Kochi terminal starts in 1QFY14; ramp-up will likely be
slow due to lagging downstream pipeline progress. The 2nd jetty at Dahej
(to raise capacity by ~30% to 13mmtpa) will be completed in 4QFY14 and
ramp-up will likely be immediate. A FY14F earnings decline (on interest/
depr charges for Kochi) is well known and factored in, but focus will likely
soon shift to FY15F, when we expect the impact of the new capacities.
Model update; raise FY13-14F EPS by 10-16%; Buy with TP at INR225
We raise FY13F/FY14F EPS by 16%/10% as we align with reported 9M
numbers and raise our marketing margin assumptions. With domestic gas
volume declines continuing and LNG demand strong, we think marketing
gains will remain high near term. After an EPS decline of 12% in FY14F,
we see a sharp 33% increase in FY15F. We also roll-forward our DCF
valuation to FY15F end. Maintain Buy.