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Petronet LNG Ltd>
  • CMP : 323.9 Chg : 0.85 (0.26%)
  • Target : 215.0 (-0.46%)
  • Target Period : 12 Month

07 Aug 2022

Offtake outlook remains muted…

About The Stock

Petronet LNG, a JV between leading PSU oil companies, is involved in LNG import and regasification.

  • The company operates two LNG terminals at Dahej and Kochi
  • Total nameplate capacity of the company is 22.5 MMTPA
Q1FY23 Results

Petronet LNG’s Q1FY23 earnings were better than estimates on account of higher blended margin.

  • Revenue increased 65.9% YoY to ₹ 14263.8 crore (our estimate: ₹ 13406.4 crore)
  • Total volume at 208 tbtu was flat YoY (our estimate: 205.2 tbtu)
  • Blended margin was at ₹ 65.5/mmbtu, higher than estimate of ₹ 60/mmbtu. EBITDA was at ₹ 1064.4 crore, up 1% YoY (our estimate: ₹ 1009.8 crore)
  • PAT was at ₹ 700.9 crore, up 10.3% YoY (our estimate: ₹ 606.4 crore)
What should Investors do?

With increase in domestic gas production, emergence of new terminals and higher LNG prices that are impacting Petronet’s volume, we expect the stock price to remain range bound in near to medium term.

We retain our HOLD rating on the stock

Target Price and Valuation

We value Petronet at ₹ 215 i.e. 11x P/E on FY24E EPS.

Key Triggers for future price performance
  • Petronet LNG is India’s leading play in import of LNG in the country and will be a beneficiary of the government’s aim to increase the share of natural gas in the energy basket to 15% over the long term
  • The 17.5 mmtpa Dahej terminal has been booked for 15.75 mmtpa under long term, thus providing visibility to long term volumes. Increase in Kochi terminal utilisation can support volume pick-up
  • LNG price trend to be key monitorable for offtake
Alternate Stock Idea

Besides Petronet, in our oil & gas coverage we also like Gail.

  • Gail is India’s leading gas transmission company, which is a beneficiary of increasing gas consumption. Stable volume growth along with higher profitability from gas trading, petchem and LPG segment due to higher oil prices will add value
  • BUY with target price of ₹ 160

Key Financial Summary

Particulars FY19 FY20 FY21 FY22E 5 Year CAGR (FY17-22E) FY23E FY24E 2 Year CAGR (FY22E-FY24E)
Revenues (| crore) 38,395.4 35,452.0 26,022.9 43,168.6 11.9 57,041.7 58,751.3 16.7
EBITDA (| crore) 3,293.4 3,989.5 4,699.5 5,252.3 15.2 4,302.7 4,659.5 -5.8
Net Profit (| crore) 2,155.4 2,697.6 2,949.4 3,352.4 14.5 2,713.5 2,932.0 -6.5
EPS (|) 14.4 18.0 19.7 22.3 - 18.1 19.5 -
P/E (x) 15.0 12.0 11.0 9.7 - 11.9 11.1 -
Price / Book (x) 3.2 3.0 2.8 2.4 - 2.3 2.2 -
EV/EBITDA (x) 9.2 7.9 6.7 5.9 - 7.0 6.2 -
RoCE (%) 26.6 22.3 26.0 27.0 - 20.3 21.1 -
RoE (%) 21.4 24.6 25.3 25.0 - 19.3 19.7 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q1FY23 Results: Blended margin above expectations

  • Total volume was at 208 tbtu (flattish YoY, up 9.5% QoQ) marginally higher than estimate of 205.2 tbtu. Regas volume at 94 tbtu was higher than our estimate of 88 tbtu while sales volume was 114 tbtu against expectation of 117.2 tbtu
  • The blended margin was higher than estimate of | 60/mmbtu and was at
    | 65.5/mmbtu
  • Reported other income of | 141.8 crore was higher than estimated

Q41Y23 Earnings Conference Call highlights

  • Expansion plans for the company are as follows: 1) FSRU terminal will have a capacity of 3-4 mmtpa while capex for the same will be | 1500-1700 crore. 2) two tanks (at the cost of | 1250 crore) and one jetty at Dahej (at the cost of | 1700 crore) 3) Extension of Dahej terminal capacity from 17.5 mmtpa to 22.5 mmtpa, with a capex of | 570 crore. 4) Completion of Kochi-Bangalore pipeline, which has a pending stretch of 215 Km from Coimbatore to Bangalore, is expected to take one more year
  • Inventory gain of | 110 crore and trading gain of | 104 crore during the quarter. The company also witnessed forex loss of | 124 crore
  • Ind-AS impact was | 147 crore
  • The company is in talks to extend the Rasgas contract beyond 2028 for which negotiations are expected to be completed by December 2023
  • On account of higher spot LNG price, industrial customers in Mangalore area are preferring alternate fuels, which is resulting in lower utilisation at Kochi
  • Utilisation for the Dahej terminal was 86-87% and Kochi terminal was 15-20%
  • Kochi regas tariff was | 81.03/mmbtu
  • The company is looking for better opportunities to tie-up contracted LNG as currently Brent-linked contracts are trading at elevated prices
  Q1FY23 Q1FY23E Q1FY22 YoY (%) Q4FY22 QoQ (%)   Comments
Total Revenues 14,263.8 13,406.4 8,597.9 65.9 11,160.4 27.8    
Raw materials costs 12,900.6 12,174.2 7,339.6 75.8 9,782.8 31.9    
Employees Cost 45.4 48.0 42.9 5.9 42.8 6.1    
Other Expenses 253.4 174.3 161.2 57.2 165.7 52.9    
Total Expenditure 13,199.4 12,396.5 7,543.6 75.0 9,991.3 32.1    
EBITDA 1,064.4 1,009.8 1,054.3 1.0 1,169.1 -9.0   Better than expected on account of blended margins being above expectations
EBITDA margins (%) 7.5 7.5 12.3 -480 bps 10.5 -301 bps    
Depreciation 191.2 200.9 191.6 -0.2 189.6 0.8    
EBIT 873.1 809.0 862.7 1.2 979.4 -10.9    
Interest 77.9 78.9 80.0 -2.7 80.3 -3.0    
Other Income 141.8 82.8 68.5 106.9 85.2 66.3    
Extra Ordinary Item 0.0 0.0 0.0 NA 0.0 NA    
PBT 937.1 812.8 851.2 10.1 984.4 -4.8    
Total Tax 236.2 206.5 215.5 9.6 234.2 0.8    
PAT 700.9 606.4 635.7 10.3 750.1 -6.6    
                 
Key Metrics                
Sales volume (tbtu) 114.0 117.2 108.0 5.6 112.0 1.8    
Regasification vol (tbtu) 94.0 88.0 101.0 -6.9 78.0 20.5    
Total Volumes (tbtu) 208.0 205.2 209.0 -0.5 190.0 9.5   Broadly in line with estimates
Blended margin |/mmbtu 65.5 60.0 60.2 8.9 72.5 -9.6   Better than estimates

Disclaimer

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