Broker's call: Petronet LNG (Buy)

Target: ₹327

CMP: ₹249.75

Petronet LNG was formed by the Indian government to import liquefied natural gas (LNG) and set up LNG terminals in India. The company operates two regasification terminals situated in Dahej (17.5 MMTPA installed capacity) and Kochi (5 MMTPA).

Q2-FY21 sales were down 33.4 per cent y-o-y to ₹6,236 crore. The company registered adjusted PAT decline of 20.8 per cent y-o-y, reaching ₹919 crore. EBITDA margin improved by 950 bps to 21.9 per cent, primarily due to reduction in operating cost and effective commercial planning.

Petronet LNG’s volume demand reaching pre-Covid levels, improvement in operational efficiency, and commissioning of the Kochi-Mangalore pipeline will boost performance in upcoming quarters.

Petronet LNG is planning to expand its Dahej terminal capacity to 19.5 MMTA in next 3-4 years to increase the volume, as currently the terminal is operating at more than 100 per cnet capacity.

Hence, we reiterate our Buy rating on the stock with a revised target price of ₹327.