IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends ‘Buy’ on Petronet LNG.
The company’s 3QFY12 profit grew 73% YoY, ahead of our estimate, led by higher capacity utilisation; firm marketing margins; and lower–than-expected auxiliary consumption, the brokerage said.
IIFL said, “We upgrade our FY12-14ii earnings estimates by 3-12% to factor in higher volume growth and lower-than-estimated auxiliary consumption. The stock trades at ~10x FY13ii and we maintain BUY on PLNG. Demand for R-LNG remains strong despite the run-up in LNG prices, which allowed it to operate the Dahej terminal above the rated capacity of 112%”.
Imminent re-rating catalysts are: 1) progress on projects under execution; 2) gas tie-ups for expansion; and 3) clarity on regulation of marketing margins, report said.
The company received board approval for the third LNG terminal (5m MT) on the east coast at Gangavaram in Andhra Pradesh and expects to complete the initial project report in the next 36 months, added IIFL.
The report was published by IIFL’s Institutional Equities Research desk.