IDFC Securities - Petronet Lng Limited (PETRONET) Petronet LNGs Q1FY19 results (Outperformer) - Another robust quarter

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IDFC Securities

Petronet LNG's Q1FY19 results (Outperformer) - Another robust quarter

Q1FY19 result highlights

PLNG reported earnings at Rs5.9bn (IDFCe Rs5.2bn) up 34% yoy, with EBITDA of Rs9.3bn (IDFCe Rs8.1bn) reporting an increase of 26% yoy.
PLNG has now reported a double digit EPS improvement for 11 consecutive quarters, with average growth over the period at 62%.
Long term regas volumes at 117 tbtu +11% yoy, (IDFCe 125 tbtu). Overall volumes of 220 tbtu, +15% yoy, (IDFCe 217 tbtu). Kochi volumes of 6.2 tbtu (8% utilisation) for Q1.
Gross margins of Rs6.5bn (+21% yoy), well ahead of estimates, driven by lower internal consumption and higher marketing margins. Blended EBITDA margins of Rs43.6/mmbtu, +12% yoy, ahead of IDFCe Rs37.5.

Key positives: Dahej utilisation at 112%. Progress on Kochi offtake pipelines creates visibility of reaching ~2mt of volumes from Kochi by FY21E

Key negatives: Kochi utilisation remains tepid. Opex higher by 9% yoy

Impact on financials: estimates unchanged post this quarter.

Valuations & View

PLNG has seen its stock underperform the Sensex (last 3M) by 5%, buffeted by concerns on sustaining the strong growth momentum seen in FY16-18 (EPS CAGR of 57%) and rumors of less than optimal capital allocation in terminals/projects overseas in Bangladesh/Sri Lanka. We however remain positive on growth prospects over FY19-20E via strong underlying demand for LNG, further expansion of 2.5mt at Dahej and growing visibility of offtake infra at Kochi which implies a continuation of high double digit growth over FY18-20E. Additionally, the clarification on insisting on a 100% TOP arrangement with the Bangladesh government as a precondition to investment in the project there should put to rest concerns on returns being impacted by strategic investments. The decision to invest in Qatar’s LNG export capacity expansion is some time away and we await details before taking a call on the returns from the same. As of now therefore, with a CAGR of 12% in EPS over FY18-20E despite a stellar base and valuations of just 13.4x FY20E EPS (RoE/ROCE of 21.7/23% in FY20E), we see valuations at attractive levels. Reiterate Outperformer, with our DCF based target price at Rs270/sh, 16.5% upside from here.

30/07/2018 7 EN

Underlying

Petronet Lng Limited

Petronet LNG develops, designs, constructs, owns and operates Liquefied Natural Gas (LNG) import and regasification terminals in India. Co. operates through the natural gas business segment. Co.'s terminals include Dahej LNG terminal, Kochi LNG terminal and Solid cargo port. Co. owns and operates a LNG regasification terminal with name plate capacity of 10 MMTPA at Dahej, in the State of Gujarat. Co. also has commissioned another LNG terminal with name plate capacity of 5 MMTPA at Kochi, in the State of Kerala. Solid Cargo Port Terminal has facilities to import/export bulk products, such as coal, steel and fertilizer.

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INE347G01014 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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