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HDFC Securities
Petronet LNG (Buy)
Target: ₹291
CMP: ₹250
Our Buy recommendation on Petronet LNG with a price target of ₹291 is premised on robust volume offtake in FY21/22E as (1) benign LNG prices will ensure high LNG imports, in turn allowing full utilisation at Dahej on its expanded capacity, (2) completion of the Kochi-Mangalore pipeline by H2-FY21 would subsequently raise utilisation at the Kochi terminal, and (3) healthy free cash flows of ₹6,700 crore over FY21 and FY22 cumulatively.
Q1 EBITDA came to ₹900 croer, a jump of 30 per cent q-o-q, on account of 75 per cent q-o-q lower operating expenditure (opex) at ₹100 crore. Q4 opex was higher than usual, courtesy the impact of Ind AS 116 and donation to the PM Cares fund. EBITDA declined 11 per cent y-o-y with 16 per cent lower volume offtake and decline in admin, travel, repairs and maintenance expenses. Calculated marketing margin was ₹57.60 crore.
Utilisation at Dahej and Kochi has bounced back to 100-103 per cent and 17-18 per cent in Q2. Capex plans of ₹350 crore FY21. Of this, ₹0.5-100 crore should be paid for capacity augmentation at Dahej via the addition of two tanks. The company is in talks with CGD companies and OMCs for LNG dispensing stations, however, permissions take time. PLNG has planned to set up 50/300/1,000 stations in 3 phases; original timeline for phase I, FY21.
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