IDFC Securities - Petronet Lng Limited (PETRONET) Petronet LNGs Q3FY19 results (Outperformer) - Lower utilisation dent earnings

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IDFC Securities

Petronet LNG's Q3FY19 results (Outperformer) - Lower utilisation dent earnings

Q3FY19 result highlights

PLNG reported earnings at Rs5.65bn (IDFCe Rs5.5bn) up 7% yoy, with EBITDA of Rs8.5bn (IDFCe Rs8.7bn) flat yoy. This is the second successive quarter of muted EBITDA growth, with Q2 seeing a 2% yoy decline. 9MFY19 EBITDA/PAT grew by 7/10% to Rs26.7bn/17.1bn
Long term Dahej regas volumes at 113 tbtu -8% yoy, (IDFCe 119 tbtu). Spot volumes of 4 tbtu flat yoy, lower than IDFCe 7 tbtu.
Overall volumes at Dahej of 197 tbtu (utilisation 103% in Q3), -8% yoy, (IDFCe 209 tbtu) while Kochi volumes were at 5 tbtu (8% utilisation in Q3) (IDFCe 6.5 tbtu). Overall 9MFY19 volumes grew by 0.7% to 639 tbtu vs 9MFY18 volumes of 635 tbtu.
Estimated Gross margins (adj for Regas revenue) of Rs6bn (+1% yoy), below estimates of Rs6.2bn driven by lower volumes. 9M Gross margins of Rs19.05bn has grown 6% yoy. Blended EBITDA margins of Rs42/mmbtu, however were +10% yoy, ahead of estimated of Rs40.4/mmbtu.

Key positives: Blended EBITDA margins improve to Rs42/mmbtu

Key negatives: Utilisation at Dahej and Kochi decline

Impact on financials: Marginal cut in EPS estimates by -1.1%/-4.3% in FY19E/FY20E respectively. TP cut to Rs265. We introduce FY21E EPS of Rs19/sh

Valuations & View

Lower LNG demand environment in the country specifically from the Power sector has dented utilization for PLNG’s Dahej terminal to a 6 quarter low while concerns on capital allocation also persist given the recent update on continuing delays in the Bangladesh project. However, management decision to go ahead with another 2mt expansion at Dahej signals continued confidence in the tariff competitiveness of Dahej (vs peers) and demand prospects in the long term. We remain positive on prospects of the Sri Lanka project, with term sheets for JV agreement, GSPA submitted and financial/legal and FPSO advisor appointed for the same. We estimate a 12% EPS CAGR over FY19-21E (RoE/ROCE of 19.7/23.5% in FY21E) which we believe merits a relook after the 9% underperformance seen in last 12Mths. Reiterate outperformer.â€‹

05/02/2019 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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