Mr. Harshad Katkar & Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities
Our BUY recommendation on PLNG with a price target of INR 294 is premised on robust volume offtake in FY21/22E as (1) benign LNG prices will ensure its high imports, in turn allowing full utilisation at Dahej on its expanded capacity, and (2) completion of the Kochi-Mangalore pipeline in 2HFY21 would subsequently raise utilisation at the Kochi terminal. 2Q EBITDA was 43% above our estimates, led by a 19% beat on total volumes and higher-than-anticipated marketing margin. APAT was 69% above our estimates mainly owing to the trickle-down effect of the beat in EBITDA and higher-than-anticipated other income.
Financial performance: 2Q EBITDA came to INR 14bn, a jump of 50/18% QoQ/YoY, clocking in an outstanding EBITDA margin of 22% (+323/946bps QoQ/YoY). It is mainly on account of higher volumes, higher tariff realisations, the positive impact of inventory revaluations, and impact of Ind AS 116. Calculated marketing margin was INR 2.4bn (HSIE INR 0.5bn).
Terminal-wise performance: Utilisation at Dahej/Kochi stood at 109/17% in 2QFY21 vs 81/14% in 1QFY21 and 108/16% in 2QFY20. Services volumes at Dahej grew 35/7% QoQ/YoY to 2.7mmt (135tbtu), indicating a recovery in demand post lockdown. Kochi terminal utilisation is expected to rise from current level post commissioning of the Kochi-Mangalore pipeline in 2HFY21.
Call takeaways: (1) Capex incurred in 1HFY21 is INR 0.15bn, and the plan for 2HFY21 is of INR 1.05bn. PLNG has three main ongoing projects: Additional tanks at Dahej (Capex of INR 12bn), the third jetty at Dahej (INR 13bn) and Regasification Terminal in Sri Lanka (USD 300mn). PLNG plans to set up a terminal on the East coast of India with an estimated Capex of INR 20bn in the next 4-5 years. (2) The Kochi-Koottanad-Bangalore-Mangalore Pipeline Project is to be commissioned by Nov-20 end, and this will aid in volume growth in the Kochi terminal of PLNG. (3) Current Dahej tariff is at INR 51.75 which will be hiked by 5% from Jan-21.
DCF-based valuation: Our target price is INR 294, based on Sept-22E cash flows (WACC 11%, terminal growth rate 3%). The stock is trading at 11.8x FY22E EPS.
Shares of PETRONET LNG LTD. was last trading in BSE at Rs.258.55 as compared to the previous close of Rs. 259.35. The total number of shares traded during the day was 178093 in over 4197 trades.
The stock hit an intraday high of Rs. 262.35 and intraday low of 256. The net turnover during the day was Rs. 46223961.