Buying opportunity emerges Petronet LNG ::HDFC Sec, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Buying opportunity emerges Petronet LNG’s (PLNG) 3Q EBITDA was below estimates at Rs 3.4bn (-34% QoQ), led by lower spot volumes and lower marketing margins (a sharp fall in spot LNG prices resulted in inventory losses). Total volumes declined to 141 tbtu (-6% QoQ). Consequently, PAT declined by 38% to Rs 1.6bn. PNG faces several overhangs (1) About 25% of current long term volumes of 7.5 mtpa are apparently at risk as prices are ~60% higher than spot. FO is currently cheaper than LT LNG (2) Kochi will hardly be utilised in FY16; higher depreciation and interest will drag profits (3) Spot trading margins may remain muted so long as prices are not stable. The ~14% crack CYTD in PLNG makes it attractive, given our medium term constructive stance (1) Offtake agreements for most of the upcoming 5 mtpa capacity at Dahej are in place (2) We foresee rising gas demand in India even as domestic production stagnates (3) We also see no risk to upward revision of regas tariffs (4) Decent return ratios (despite ~5% utilisation at Kochi for ~ 22% of installed capacity, PLNG will deliver ~16/12% RoE/RoCE in FY17E) We have cut our estimates for FY16/17E by ~13/18% factoring lower profits in the spot biz. However, we upgrade PLNG to BUY with a TP of Rs 205/sh (14/2.2x FY17E EPS/BV) on the back of attractive valuations and long term drivers being in place. 3QFY15 update  Total volumes stood at 141 tbtu (-6% QoQ, +14% YoY). Dahej : Long term 94 tbtu (+0.4% QoQ), spot 18 (-26%), tolling 28 (-9%). Regasification margins Rs 38.6/mmbtu (flat), spot margin -Rs 3.9/mmbtu (vs 58 QoQ). Kochi : Spot 1 tbtu (-24% QoQ), utilisation 2%, regasification margins Rs 65.1/mmbtu (flat). Capex on track  Capacity addition from 10 to 15 mnT in Dahej (capex Rs 24bn) and associated infrastructure (capex Rs 13bn). This will be commissioned in 2HFY17. Risks and challenges  Kochi volumes will be low and losses of ~Rs 5bn/yr will continue until the Mangalore/Bangalore pipelines are ready

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3011196