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

PETRONET LNG: Volumes in-line; Dahej to recover

(PLNG IN, Mkt Cap USD4.4b, CMP INR216, TP INR310, 44% Upside, Buy)

 

• Petronet LNG (PLNG)'s numbers were in line with our estimates, with volumes at 209tbtu and utilization rates at Dahej/Kochi at 88%/24% in 1QFY22.
• Kochi was largely unaffected, while Dahej was impacted by the second COVID wave. The management expects the utilization rate at Kochi to be ramped up by ~30% by end-FY22. On the other hand, Dahej would continue to operate at over 95% owing to tied-up contracts (16.5mmtpa of 17.5mmtpa).
• We remain positive on the gas story in India as the market share of gas in the primary energy mix is just 6%. It is expected to almost double by CY30 (growing at a CAGR of 6-8%, as per our gas demand-supply model), primarily on account of the development of new CGDs and an increase in consumption at fertilizer and refining/petchem plants.
• Dahej is expected to expand to 22.5mmtpa in two phases, while Kochi would see a utilization ramp-up from newly connected consumers. Factoring in the same, we build in an EBITDA/PAT CAGR of 6-8% over FY21-24E and maintain Buy on the stock.
• Apart from the committed capex plan of INR41b for the Dahej expansion over the next three years, the company had announced INR120b in investments in LNG retailing and compressed biogas in 4QFY21. The commentary has raised concerns on capital allocation and possible returns from the new investments, thereby keeping the stock under pressure.