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MOSL: ONGC (Buy)-Takeaways from OPaL’s Dahej Plant Visit

ONGC: Takeaways from OPaL’s Dahej Plant Visit

(ONGC IN, Mkt Cap USD29.3b, CMP INR160, TP INR196, 22% Upside, Buy)

 

About OPaL

• Incorporated in 2006, ONGC Petro additions Limited (OPaL) is a joint venture (JV) between ONGC (promoter - 49.36%), GAIL (co-promoter - 49.21%) and GSPC (co-promoter - 1.43%).
• The company has set up a 1.9mmtpa (1.1mmtpa ethylene, 0.4mmtpa propylene and rest is chemicals) petrochemical complex in Dahej, Gujarat.
• The complex was commissioned in Mar'17 and built with a total capex of INR308b (including interest cost of ~INR90b).
• The plants are running at ~90% utilization rates in an integrated fashion.
• EBITDA margin for the company stands at ~18-20%, with higher domestic realization.
• OPaL expects to achieve EBITDA of ~INR15b in FY19, ~INR25b in FY20 (with full utilization), and ~INR35b after (a) the completion of the Hazira-Dahej Naphtha pipeline, (b) the exit from SEZ and (c) the completion of other debottlenecking by FY21. 

OPaL's kickoff

• OPaL was created with an intention of producing value products using ONGC's naphtha from Hazira, and ethane, propane and butane from ONGC's extraction plant at Dahej.
• Dahej complex has a total of eight furnaces, with flexibility of changing feedstock inputs, base design for 60% naphtha and 40% gases. This gives the company an advantage of switching between gas and naphtha during periods of high gas prices (in winter), and vice versa.
• Total gas consumption stands at ~5.3mmscmd, with 1.3mmscmd of LNG used purely for power generation.