Petronet LNG- Sell advice by Religare

PAT beats estimates; but future earnings outlook muted
PLNG posted Q3 PAT at Rs 3.18bn above our/street estimates due to a) higher volumes of 140tbtus and b) healthy mktg margins on short/spot volumes. Other highlights: a) commissioning of Kochi terminal by Mar’13 with lower utilization in FY14 (0.5mmtpa), b) completion of second jetty at Dahej terminal by Mar’14 and expansion by early 2016 (10 to 15mmtpa) c) GSPC contracted 2.25mmtpa in PLNG’s expanded capacity for 20yrs. Maintain SELL in light of limited visibility on Kochi terminal utilization

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 Q3 earnings healthy but FY14 outlook muted: Q3PAT at Rs3.18bn was ahead of our estimates of Rs2.9bn on account of higher than estimated volumes processed (140tbtus) and a higher share of short term, PLNG-marketed, volume of 30.5tbtus in the sales mix, where PLNG earned a healthy mktg. margin of US$0.4/mmbtu. The earnings outlook for FY14 remains muted on lower utilization of Kochi terminal (Mar ’13) in light of limited connectivity and undeveloped markets as GAIL’s Kochi-Mangalore-Bangalore P/L is not likely to be commissioned before end of 2013.
 Dahej terminal capacity expansion as per schedule: While second jetty is expected to be ready by Mar’14, the Dahej’s capacity expansion is expected to complete by early 2016. GSPC has already contracted 2.25mmtpa of the same for 20 years.
 Dahej utilization to remain healthy in FY14: Besides long term volumes, PLNG has already contracted 16/12 slots to GAIL/GSPC for short-term/spot volumes, leaving ~25slots for PLNG
 Maintain SELL with revised TP of Rs 165; Prefer GAIL over PLNG: On back of (a) muted earnings outlook for FY14 and (b) commissioning of Dabhol terminal (Jan 13) and expansion of Shell’s Hazira (Q3-Q4CY13) will increase bargaining power for GAIL/GSPL in terms of short/spot LNG sourcing. We revise our TP to Rs165/sh (Rs 160/sh earlier) as we roll our estimates forward to Dec13.