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Petronet LNG (Buy)
Target: ₹330
CMP: ₹232.25
The Q4-FY21 earnings for Petronet LNG stood below our and street estimates. The miss on our estimates stemmed primarily from lower than estimated LNG throughout and higher operating expense. Abnormally higher spot LNG prices during the quarter, due to supply disruptions, impacted LNG imports in India, leading to weaker utilisation for Petronet LNG.
However, we believe that the near term disruptions won’t impact the long-term prospects for growth in LNG consumption in the country. As per the IEA, LNG imports in India are set to rise by 1.5x by 2025.
In that backdrop, Petronet LNG has decided to undertake a significant capex program of ₹18,300 crore, spread over the next 5-6 years, including ₹4,750 crore towards capacity expansion, ₹1,540 crore towards a green field terminal at Gopalpur, ₹4,000 crore towards setting up of Compressed Bio Gas plants. ₹8,000 crore will be towards setting up of almost 1,000 Auto LNG terminals, along national highways, with the intent to expand market for LNG consumption in the country.
Therefore, we maintain our Buy rating on Petronet LNG with a target price of ₹330/share as we find the stock attractively valued, trading at just 9.5x FY23.
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