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Petronet LNG's Q3 FY12 results beat our expectations due to all-time high
capacity utilization of 114% (our estimate: 105%) and was reinforced by
marketing margin (implied) of ~Rs 58/mmBtu (our estimate: Rs 28/mmBtu).
Capacity utilization at 114%, 8% above estimate
The company continues to utilize its Dahej terminal to the maximum with
sales of 144.9 tbtu, 8.3% ahead of our expectation of 133.9 tbtu. Thus,
capacity utilization stood at 114% during Q3 FY12, as against 106% in Q2
FY12. We raise our FY12 capacity utilization estimate to 109% driven by the
persistent demand-supply gap of natural gas in India.
Implied Q3 FY12 marketing margin at Rs 58/mmBtu
Strong demand for natural gas has enabled Petronet to earn marketing margin
of Rs 58.2/mmBtu on spot cargoes, which was much above our expectation of Rs
27.8/mmBtu. Notably, such a high margin was earned on spot LNG which was
priced around $ 14-16/mmBtu during Q3 FY12. We expect the company to
continue to earn healthy marketing margins in the near term.
Revenue at Rs 63,303 mn, up 75% y-o-y
Total revenue came in at Rs 63,302.6 mn, 17% ahead of our estimates led by
higher capacity utilization and high marketing margins. Sales increased
74.5% y-o-y on account of sales volumes increasing by 21.1% & blended regas
margins higher by 39%. The q-o-q jump of 18% in revenue reflects higher
marketing margin of Rs 58.2/mmBtu earned during Q3 FY12, compared to Rs
37.1/mmBtu in Q2 FY12.
EBITDA at Rs 5,572 mn, up 61.2% y-o-y
Q3 FY12 EBITDA stood at Rs 5,572.5 mn, 24.5% ahead of our expectation,
driven by higher than expected marketing margin. OPM stood at 8.8%, higher
than our estimate of 8.3%, but lower than Q2 FY12 OPM of 9.3%.
Outlook and Valuation
The management has indicated that it has not seen high LNG prices acting as
a deterrent to demand. Moreover, it does not see customers switching back to
liquid fuels once they have started using gas. The company is confident of
optimal performance as a result of the huge shortage of gas in the country.
We raise our FY12 sales estimate to 10.9 MMT, translating into annualized
capacity utilization of 109% (9M FY12 capacity utilization stands at 108%).
Hence, our FY12 EPS estimate goes up from Rs 12.4 to Rs 14.2.
With the commissioning of the Kochi terminal in FY13, capex requirements of
the company are expected to reduce going forward, enabling Petronet LNG to
turn free cash flow positive in FY14E.
We reiterate BUY with a target price of Rs 209, which translates into a
hefty upside of 27.3%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Petronet LNG's Q3 FY12 results beat our expectations due to all-time high
capacity utilization of 114% (our estimate: 105%) and was reinforced by
marketing margin (implied) of ~Rs 58/mmBtu (our estimate: Rs 28/mmBtu).
Capacity utilization at 114%, 8% above estimate
The company continues to utilize its Dahej terminal to the maximum with
sales of 144.9 tbtu, 8.3% ahead of our expectation of 133.9 tbtu. Thus,
capacity utilization stood at 114% during Q3 FY12, as against 106% in Q2
FY12. We raise our FY12 capacity utilization estimate to 109% driven by the
persistent demand-supply gap of natural gas in India.
Implied Q3 FY12 marketing margin at Rs 58/mmBtu
Strong demand for natural gas has enabled Petronet to earn marketing margin
of Rs 58.2/mmBtu on spot cargoes, which was much above our expectation of Rs
27.8/mmBtu. Notably, such a high margin was earned on spot LNG which was
priced around $ 14-16/mmBtu during Q3 FY12. We expect the company to
continue to earn healthy marketing margins in the near term.
Revenue at Rs 63,303 mn, up 75% y-o-y
Total revenue came in at Rs 63,302.6 mn, 17% ahead of our estimates led by
higher capacity utilization and high marketing margins. Sales increased
74.5% y-o-y on account of sales volumes increasing by 21.1% & blended regas
margins higher by 39%. The q-o-q jump of 18% in revenue reflects higher
marketing margin of Rs 58.2/mmBtu earned during Q3 FY12, compared to Rs
37.1/mmBtu in Q2 FY12.
EBITDA at Rs 5,572 mn, up 61.2% y-o-y
Q3 FY12 EBITDA stood at Rs 5,572.5 mn, 24.5% ahead of our expectation,
driven by higher than expected marketing margin. OPM stood at 8.8%, higher
than our estimate of 8.3%, but lower than Q2 FY12 OPM of 9.3%.
Outlook and Valuation
The management has indicated that it has not seen high LNG prices acting as
a deterrent to demand. Moreover, it does not see customers switching back to
liquid fuels once they have started using gas. The company is confident of
optimal performance as a result of the huge shortage of gas in the country.
We raise our FY12 sales estimate to 10.9 MMT, translating into annualized
capacity utilization of 109% (9M FY12 capacity utilization stands at 108%).
Hence, our FY12 EPS estimate goes up from Rs 12.4 to Rs 14.2.
With the commissioning of the Kochi terminal in FY13, capex requirements of
the company are expected to reduce going forward, enabling Petronet LNG to
turn free cash flow positive in FY14E.
We reiterate BUY with a target price of Rs 209, which translates into a
hefty upside of 27.3%.
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