Motilal Oswal - Petronet Lng Limited (PETRONET) MOSL: PETRONET LNG (BUY)-Adjusted EBITDA higher than estimated

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Motilal Oswal

Swarnendu Bhushan

MOSL: PETRONET LNG (BUY)-Adjusted EBITDA higher than estimated

Petronet LNG: Adjusted EBITDA higher than estimated

(PLNG IN, Mkt Cap USD4.8b, CMP INR435, TP INR547, 27% Upside, Buy)

EBITDA grew 38% YoY and 2% QoQ to INR6.2b, against our estimate of INR6.3b. Adjusted for INR850m of hedging cost in other expenditure, EBITDA was INR7.05b, higher than our estimate. This was primarily due to Gorgon volumes, with Kochi tariff landing at Dahej.
Throughput at Dahej grew 19% YoY (but declined 6% QoQ) to 177TBtu, against our estimate of 191TBtu, implying ~93% utilization on expanded capacity of 3.75mmt for the quarter. This includes (in TBtu) 107 long-term (flat QoQ), 69.6 third-party (-8% QoQ), and 0.4 pure short-term (-92% QoQ). Throughput was lower QoQ due to high LNG prices of USD9.8/mmBtu in January 2017.
Kochi utilization stood at 4%. However, FACT has commenced offtake and Kochi refinery is also expected to ramp up soon.

Gas demand growth critical, but take-or-pay offers earnings certainty

Incremental gas demand will be a function of liquid v/s gas economics; however, take-or-pay contracts offer earnings certainty for PLNG.
As against 15mmt capacity, PLNG has ~16mmt (RasGas: 8.5, new contracts: 7.5) long-term take-or-pay contracts. We do not see much of a problem in utilization of the Dahej facility.
Out of four sections, GAIL has already awarded tenders for construction of three along the Kochi-Mangalore pipeline. Once completed, this will also help in ramp-up of the Kochi LNG terminal.

11/05/2017 10 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

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Swarnendu Bhushan

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MOSL: PETRONET LNG (BUY)-Adjusted EBITDA higher than estimated

MOSL : PETRONET LNG: Volumes dip, but outlook remains intact

For PETRONET L N G, the environment deterioration entails a downgrade to Neutral

MOSL: PETRONET LNG (Buy)-Volumes in-line; Dahej to recover

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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