Petronet LNG: Underperformance pricing in concerns; upgrade to ADD ::Kotak Sec, report

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Underperformance pricing in concerns; upgrade to ADD. PLNG reported weak results led by dismal marketing margins and lower regasification volumes. Nevertheless, the recent underperformance is adequately pricing in concerns on volatility of spot margins and lower utilization of Kochi terminal. We upgrade PLNG to ADD from REDUCE earlier with a revised TP of `220 (`190 previously) and we would advise investors to look for good entry points noting strong medium-term growth prospects.

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Petronet LNG - Serious Spot; Result Update Q3FY15 ::Edelweiss, report

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Disappointing performance… • Petronet LNG :: ICICI Securities, report

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Buying opportunity emerges Petronet LNG ::HDFC Sec, report

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Strong performance… • Petronet LNG :: ICICI Securities, pdf link

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J.P. Morgan - Petronet LNG Ltd. (PLNG IN)

Petronet LNG Ltd. (PLNG IN) Headline beat on more remunerative volume mix; volumes remain subdued		Overweight Price: Rs144.80 30 Apr 2014 Price Target: Rs175.00 PT End Date: 31 Mar 2015

Petronet LNG reported a 4Q profit of Rs1.69bn (up 25% q/q; down 31% y/y), above our and consensus estimates, with a more remunerative volume mix (despite lower volumes), and higher other income. The coming quarters are likely to remain challenging, with Kochi utilizations remaining low (c.5%) – however, the Dahej terminal should see incremental growth. We believe the near-term earnings pressure due to low utilizations at Kochi is largely discounted by the stock, and visibility over earnings growth (JPMe – c.26% CAGR over FY14-17) will drive stock performance.

Table 1: Petronet LNG earnings summary

INR mn

	4QFY13	1QFY14	2QFY14	3QFY14	4QFY14	Y/Y	Q/Q
Sales	84,408	83,770	94,489	93,101	104,085	23%	12%
Regas	248	672	446	720	193	-22%	-73%
Net Sales	84,656	84,442	94,935	93,821	104,278	23%	11%
Raw Material	79,986	79,593	90,316	89,171	99,344	24%	11%
Staff Cost	137	86	80	106	195	42%	85%
Other expenditure	190	785	900	1,045	871	358%	-17%
EBITDA	4,344	3,978	3,639	3,499	3,868	-11%	11%
Interest	247	240	386	783	786	218%	0%
Depreciation	468	467	597	1,017	1,000	114%	-2%
Other Income	203	152	161	216	308	52%	42%
PBT	3,831	3,423	2,818	1,916	2,389	-38%	25%
PAT	2,451	2,253	1,818	1,356	1,693	-31%	25%

Source: Company reports.

· Volumes subdued: Volumes during the quarter were subdued, falling 5% sequentially, as with lower throughput at Kochi, and a fall in tolling volumes, due to lower demand. Current low spot prices could spur demand, in the company’s view.

Figure 1: Quarterly Volumes

TBTU

Source: Company reports.

· Margins improve: With lower tolling volumes, PLNG was able to bring in a higher proportion of short-term supplies, improving realizations in the process (EBITDA/mmbtu at c.Rs33 in 4Q, vs. Rs28.3 in 3Q).

Figure 2: Quarterly EBITDA/unit

INR/mmbtu

Source: Company reports and J.P. Morgan estimates.

· Dahej volumes could see incremental growth: PLNG has commissioned the second jetty at Dahej, which potentially allows for incremental volume growth, due to higher load handling capabilities. The long-term contract with GSPC, allotting 1.25MMTA of capacity has also commenced. In addition, the company has tied up 0.8MMT of supplies in FY15, with agreements with buyers already reached. The company also expects GAIL to bring in c.1MMT this year – potentially leading volumes at Dahej over 10.5MMT in FY15.

· Kochi utilizations to remain low in FY15: The company expects utilization at Kochi to remain in the range of 5% in FY15, with the continuing lack of pipeline connectivity for the terminal.

· Project update: The 5MMTPA expansion at Dahej remains on track to be commissioned at the end of CY16 – the company has received an advance of Rs3bn from long-term offtakers towards booking capacity already (further Rs9bn is to be received).

· Stock direction: While we expect the next few quarters to be challenging, we believe this is largely discounted by the stock. PLNG is a key beneficiary of India’s structural leverage to LNG – we believe visibility of strong earnings growth will drive stock performance over the next 18-24 months.

Investment Thesis

PLNG is the primary play on increasing usage of LNG in India – where a large gap between demand and domestic supply will keep demand for LNG in place, in our view. While we believe the next few quarters will be challenging (given low Kochi utilization), the stock price reflects these concerns, in our view. Increasing volumes at Dahej would help drive earnings expansion in FY15-16. We view PLNG as well positioned for investors with a horizon of 18-24 months.

Valuation

Our Mar-15 PT of Rs175 is based on DCF, with a WACC of 11.7% and a terminal growth rate of 2%.

Risks to Rating and Price Target

Key downside risks include lower-than-expected regas margins and volumes, and execution delays.

Petronet LNG - Q3FY14 Result Update - Weak Core Earnings, Lower Taxes Pep-up PAT : Centrum

Rating: Hold; Target Price: Rs120; CMP: Rs110; Upside: 9.1%



Weak Core Earnings, Lower Taxes Pep-up PAT



We maintain Hold rating on the stock with a revised PT of Rs120. We
believe, over the next 2 years, the earnings will continue to face
multiple headwinds leading to weak outlook as it stares at a scenario
of (1) high LNG prices, competition and weak demand leading to subdued
capacity utilisation; (2) inordinate delay in pipeline commissioning
at Kochi leading to increase in under-recovery of fixed costs and (3)
lack of pricing power to charge trading/marketing margins as in
FY12/FY13. During the quarter, core earnings reflected weakness
despite higher throughput of spot/tolling volumes as trading/marketing
margins slumped.

$ Earnings snapshot and outlook: EBITDA at Rs 3.5bn (-32% YoY and -4%
QoQ) and RPAT at Rs1.4 bn (-57% YoY and -25% QoQ) were under pressure
on account of (1) decline in trading/marketing margins at Rs21 mn
(-98% YoY and-79% QoQ) and (2) under-recovery of costs at Kochi of Rs1
bn.  Owing to shift to MAT regime, tax rates were lower at 29% which
aided PAT. We believe the company's earnings will remain under
pressure over the next 2 years owing to (1) steep decline in
trading/marketing margins; (2) under-recovery of fixed costs at Kochi
at Rs 2.9bn/Rs 3.9bn in FY14E/FY15E; (3) weak demand for RLNG marring
operating leverage and (4) capex cycle of Rs76bn subsumed would start
to deliver earnings from FY16E/FY17E and hence leading to a decline in
core RoE to 16%/18% in FY15E/FY16E vs. 33% in FY13.

$ Project updates: The capex for Dahej expansion by 5 MMTPA has been
reduced by Rs8bn to Rs24bn and the project is guided to be
commissioned in Nov-16. Pending approvals from Gangavaram port, we
expect the company to shelve plans to float an FSRU terminal at
Gangavaram and instead focus on a land based RLNG terminal. The second
jetty is on track and will be commissioned in Apr-14. In addition, the
company plans to set up a 40 MW wind plant for a capex of Rs2.5bn over
the next 12-15 months.

$ Outlook on off-take: In Q3FY14, PLNG signed off-take agreements of
2.5 MMTPA with BPCL and IOCL. With this, PLNG provides firm off-take
arrangement with take-or-pay clause of 14.75MMTPA for Dahej expansion
scheduled for Nov-16. Until then, Dahej terminal offers firm
visibility of 9.8MMTPA (term+spot+tolling). As indicated by us in
Q2FY14 update, management confirmed that competition from Shell Hazira
and Dabhol terminals was on the rise. With stagnant demand at high
RLNG prices, we expect the company to charge benign trading/marketing
margins.

$ Valuations and key risks: We valued the company as average of our PT
derived on (1) DCFF and (2) PEx assigned to Dec-15E EPS. Accordingly,
we arrived at our price target of Rs 120 (Rs110 earlier). At our
implied PT, Petronet LNG would trade at a P/Bx and P/Ex of 1.6x and
11.7x FY15E respectively. Our PT continues to be contrarian and below
street consensus of BUY rating and a Bloomberg consensus price target
of Rs145. Key risks to our rating are (1) higher capacity utilization;
and (2) higher trading/marketing margins.



Thanks & Regards

--
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Petronet LNG: Buy :: Business Line

Petronet LNG Limited - Earnings miss on lower trading gains and higher costs ::Credit Suisse

● PLNG's EBITDA missed our estimates by 18% (consensus by 

13%) primarily on lower volumes (4% behind expectations), a fall 

in trading gains and higher costs. Management commentary 

suggests demand for LNG continues to be sluggish.

● We estimate c.20-25% of the EBITDA miss is on account of lower 

volumes. Depreciation and interest costs were in line, while tax 

rates were 170 bp ahead, leading to a Rs0.7 bn miss on PAT.

● The second Dahej Jetty is expected to be operational by Apr-14, 

and could provide some volume upside to PLNG. Financial 

closure for the Dahej expansion has been achieved, and the EPC 

is likely to be awarded in the next few months.

● While PLNG appears inexpensive on headline (10.4x FY15 EPS), 

we think the stock lacks catalysts near term. Media reports (e.g., 

ET) quote GAIL officials stating there is unprecedented resistance 

to the Tamil Nadu pipeline, the completion of which is critical for 

profitable Kochi LNG operations. We maintain NEUTRAL.

LKP Research :Petronet LNG - Q1FY14 Result Update

Petronet LNG - Q1FY14 Result Update

Lower trading margin and spot volume decline hurts operational performance

PLNG Q1FY14 operating profit of Rs4bn was lower than our estimate of Rs4.5bn mainly on account of lower spot volume and lower trading margin. Spot volumes witnessed a sequential decline of 22.2% to 18.9tbtu (yoy -7.4%). Implied trading margin on spot volumes declined by 85.5% qoq to Rs4.6mmbtu, much lower than our expectation of Rs30/mmbtu, due to weak demand from power sector as a result of cheaper coal prices. PLNG’s operating margin for the quarter declined by 42bps qoq to 4.7% (yoy -179bps). We maintain our BUY rating on PLNG with a revised price target of Rs156. At the CMP, the stock is trading at 8.2x and 5x FY15e EPS and EBITDA respectively.

Valuation and view

The current imbroglio of the Kochi-Mangalore/Bangalore pipeline would continue to affect volume ramp up at PLNG’s Kochi terminal. Any early solution of this problem would be very positive for the company in the near term. In the longer run, we expect the gas deficit scenario in India to worsen as domestic gas supplies fall woefully short in comparison with growth in demand for gas. By 2015 we estimate gas demand to increase to 317mmscmd while supply is expected to grow to 202mmscmd, thus leading to a huge deficit of 115mmscmd. PLNG is doubling its capacity by FY16 to 20mntpa to capitalize on the high demand supply mismatch of gas in the energy deficient Indian markets.

We value PLNG on DCF basis given the long term earnings visibility. We have used WACC of 12.3% and terminal growth rate of 2% for DCF valuation. We have not valued the proposed 5mntpa Gangavaram LNG terminal in Andhra Pradesh. Further progress and clarity on this project could lead to upside to our valuation of PLNG. We maintain our BUY rating on PLNG with a revised price target of Rs156. At the CMP, the stock is trading at 8.2x and 5x FY15e EPS and EBITDA respectively.

Actual v/s Estimates

Y/E, Mar (Rs. m)	Q1FY14	Q4FY13	qoq (%)	Q1FY13	yoy (%)	LKP Estimates	Deviation (%/bps)
Revenue	84,442	84,656	-0.3%	70,304	20.1%	88,121	-4.2%
EBITDA	3,978	4,344	-8.4%	4,571	-13.0%	4,506	-11.7%
EBITDA (%)	4.7%	5.1%	-42 bps	6.5%	-179 bps	5.1%	-40 bps
PAT	2,253	2,451	-8.1%	2,708	-16.8%	2,668	-15.6%

LKP Research

Petronet LNG - Q1FY14 result update - Centrum

Lower trading/marketing margin drags earnings
Petronet LNG’s results for Q1FY14 were below our and street expectations
primarily due to sharp decline in trading/marketing margins which dragged
earnings. Capacity utilization was healthy at 102% vs. 96% in Q4FY13 and 100%
in Q1FY13. We believe that owing to weak demand for RLNG, the company had
focussed on higher capacity utilization (CU) and charged significantly lower
trading/marketing margin to enable higher off-take, which is in contrast to its
historical earnings model. We have downgraded the stock to HOLD with a
revised PT of Rs 124 primarily to factor in pressure on core earnings and lower
trading/marketing margins.
Earnings snapshot: Higher capacity utilization (CU) at 102% (+200 bps YoY and +600
bps QoQ) and higher unit sale price at Rs754 (+25% YoY and +6% QoQ) led to increase
in net sales to Rs 83.8 bn (+20% YoY and -1% QoQ). EBITDA at Rs 3.9bn (-13% YoY and -
8% QoQ) and RPAT at Rs2.3 bn (-17% YoY and -8% QoQ) was under pressure on
account of in (1) decline in trading/marketing margins at Rs 0.09 bn (-87% QoQ and
-89% YoY) and (2) increase in internal consumption of RLNG.
Trading and marketing margins: During Q1FY14, we believe PLNG earned
~Rs0.09bn (USD0.04/MMBTU) as net trading/ marketing margins, down 87% QoQ and
up 89% YoY. We remain conservative and have factored average marketing/trading
margins of USD0.2/MMBTU, although the management remains confident of pick-up
in trading /marketing margins to USD0.3/MMBTU. We believe that since RLNG price is
outside the regulatory purview, any attempt to regulate marketing/trading margins
for PLNG/GAIL and regas charges for PLNG would be challenging and hence do not
see any regulatory risk.

Petronet LNG: BUY ::Business Line

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

Petronet LNG Positives priced in:: Prabhudas Lilladher,

Petronet LNG’s (PLNG’s) Q3FY13 result was better than our expectation on the
EBITDA and bottom-line front. Top-line registered a growth of 33.1% YoY to
Rs84.2bn (Rs63.30bn) on account of 38% YoY growth in realisations, while the
volumes were down on YoY basis at 140.6TBTU. EBITDA/TBTU witnessed an
expansion, from Rs34.7/TBTU in Q3FY12 to Rs37.6/TBTU in Q3FY13, broadly in line
with our estimates. Bottom-line, during the quarter, stood at Rs3,185m (Rs2,954m),
an increase of 7.8% YoY as against our expectation of Rs3,003m.

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

PLNG - Q3FY13 Result Update - Centrum

Q3FY13 Result Update

Petronet LNG

Buy

Target Price: Rs193

CMP: Rs165

Upside: 17.3%

Yet another stellar quarter

Petronet once again beat its highest ever quarterly profits of Q2 albeit marginally (up 1.2% QoQ) backed by sequential growth in re-gasification volumes and healthy re-gasification margins. Being the strongest quarter, re-gasification volumes in Q3 stood at 140.6TBTUs vs. 135.0TBTUs in Q2 but lower than 144.9TBTUs reported in Q3FY12. Lower margins on spot volumes led to 1.5% sequential decline in blended re-gasification tariffs at Rs43.7/mmbtu vs. Rs44.3/mmbtu. Petronet’s Kochi terminal is expected to be commissioned by April 2013 while the second jetty at Dahej is expected to be operational by April 2014. Volume growth from Kochi terminal is likely to be muted over the next couple of years due to pipeline connectivity constraints, but is likely to pick up from FY16E onwards. Although, earnings are likely to be subdued over FY14-15E due to lower utilisation of Kochi, we like Petronet due to its medium to long term growth prospects and maintain ‘Buy’ on the stock.

Petronet LNG, Flat earnings profile but strong long-term fundamentals:: Daiwa

Flat earnings profile but strong
long-term fundamentals
• Slow processing volume ramp-up at the Kochi terminal, but
capacity utilisation likely to remain high at the Dahej terminal
• We project a flat earnings profile for FY13-15, due mainly to the
capitalisation of the new Kochi terminal
• Raising target price to INR175 but downgrading to Outperform
post good share-price run since May 2012