Petronet LNG Research Report By Prabhudas Lilladher

Rating: BUY | CMP: Rs242 | TP: Rs403

Another strong performance

Quick Pointers:

 Record tariffs, inventory and trading gains along with stable volumes drive Q3 earnings.

 Lowest tariffs, superb pipeline network and well-entrenched reach in the domestic LNG markets to help PLNG compete with new terminals.

We increase our FY21E estimates by 7% to factor in strong 9M performance and FY22/23E by 3.5/3.4% as we increase spot margins. We believe PLNG 1) is a play on India’s rising LNG imports supported by benign spot LNG prices 2) possess solid business model given high earnings visibility 3) has limited competition to PLNG’s well-entrenched reach in the LNG business. Reiterate BUY with a DCF based PT of Rs403 (Rs399).

 Record margins, inventory gains, stable volumes drive earnings: Petronet LNG (PLNG) reported Q3FY21 EBITDA and PAT of Rs13.4bn (+21% YoY; PLe Rs 11.1bn;) and Rs8.8bn (+30%YoY; PLe Rs7.0bn), respectively. For 9MFY21, EBIDTA/PAT was at Rs36.0bn (+10%YoY) and Rs23.2bn (-4%YoY). Operationally better results were due to better than expected blended tariffs.

 Dahej terminal remains the star: During the quarter, regasification volumes were at 235tbtu (254 tbtu in Q2FY21; PLe 227). Dahej degasified volumes were at 222tbtu (243tbtu in Q2) while Kochi volumes were at 13tbtu. PLNG’s Q3 blended tariffs were at Rs63.2/tbtu against Rs55.4 in Q3FY20 and Rs59.7 in Q2FY21.

 The Kochi-Mangalore pipeline was commissioned by January 21 wherein utilization levels are expected to increase over 30%.

 Multiple projects at exploratory stage: Management clarified that they are exploring multiple capex options like the Sri Lanka FSRU LNG terminal along with opportunities on East Coast of India. With new gas supplies from KGD6 coming on stream, PLNG is likely to revisit demand opportunities before deciding on capex commitment.

 Limited threat from new terminals: PLNG management seems quite confident of maintaining their pre dominant stature, despite start of competing Mundra and Ennore LNG terminals given their low cost operations. Addtionally, high growth opportunities from CGD and power sector rampup will spur demand for gas in the country, which will necessitate more infrastructure coming on stream.