Petronet LNG (Q2 FY13)

India Infoline News Service | Mumbai |

PLNG reported its Q2 FY13 revenues at Rs75.5bn which were 40.7% up yoy and 7.4% up qoq.

CMP Rs169, Target Rs187, Upside 10.7%

  • Petronet LNG (PLNG) reported its Q2 FY13 revenues at Rs75.5bn which were 40.7% up yoy and 7.4% up qoq. Total volumes handled in the quarter were 135tbtu, which were flat yoy but meant a heartening recovery on qoq basis (+6.3%). The sequential recovery in volumes was on back of lower short term gas prices which boosted the short term and spot volumes (+30.3% qoq). In the quarter, PLNG handled 90.2tbtu in long term contracts while 27.4tbtu in short term and spot cargos. The re-gas cargos for the quarter were at 17.3tbtu.
  • The OPM for the quarter at 6.9%, improved sequentially by 37bps although on a yoy basis it was down 149bps. The sequential increase in OPM was attributed to 1) Higher operating leverage (106% capacity utilization in Q2 FY13) 2) Higher proportion of short term and spot cargos, wherein the company earns a marketing margin 3) Higher re-gasification cargos handled in the quarter. 
Cost analysis
As a % of net sales Q2 FY13 Q2 FY12 bps yoy Q1 FY13 bps qoq
Material costs 92.1 90.7 140 92.5 (41)
Personnel Costs 0.1 0.1 (0) 0.1 1
Other overheads 0.9 0.9 8 0.9 3
Total costs 93.1 91.6 149 93.5 (37)
Source: Company, India Infoline Research
  • The bygone quarter saw improved profitability and recorded highest ever PAT beating our estimates. PAT was reported at Rs3.14bn which was 20.9% up yoy and 16.2% up qoq.
  • Key updates on the ongoing projects:
  • Gangavaram: All the pre project activity is on schedule and the land based unit is expected to come up by end of CY16. The company plans to hire a FSRU (temporary floating re-gasification unit) by end of CY14 with a capacity of handling 2-3mtpa before the land based unit comes up. 
  • Kochi: The terminal is expected to be commissioned in Q4 FY13. CY13 would see the new terminal doing 0.75-1mtpa levels before the pipeline connecting Kochi with Mangalore (via Tamil Nadu) comes up at the end of the CY13.
  • Dahej: EPC contracts have not been awarded yet for the Dahej re-gas capacity expansion project as the environment clearance is awaited. The scheduled target for the project is end of 2015. Meanwhile work on Dahej second jetty is ongoing and it is expected to be ready by early 2014. It would help increasing the marine capacity and help the terminal to handle volumes beyond 12mtpa.
  • Other takeaways from conference call:
  • The capex spent on Dahej re-gas project and Gangavaram terminal have been minimal as of now as the EPC contracts are yet to be awarded. On the Dahej second jetty Rs3bn has been spent while on Kochi terminal Rs36bn has been incurred. An additional Rs6bn would be spent on Kochi terminal before its commissioning.
  • At the quarter end, the company had a comfortable cash position of ~Rs10bn. The debt on the books was Rs33bn with a healthy D/E of 0.8.
  • The management guides for higher re-gas margins at Kochi terminal vis-à-vis Dahej terminal, owing to higher capex incurred at Kochi terminal.
  • Management informs that 70% of the 5mtpa capacity being built under Dahej expansion is in the process to be booked with GAIL (2.5mtpa) and GSPC (1mtpa). 
  • The inventory position was seen to be comfortable at the quarter end post the peak inventories observed in April 2012. Though inventory position was reported at Rs10.7bn, but management informed the position has been further liquidated (owing to 2 cargos being in transit at quarter end).
  • The short term gas prices have seen some softening in recent times, thereby boosting the demand from various domestic sectors including power. We believe the softening trend in gas prices would continue ahead on the back of a skewed pricing environment (Asian prices much higher than rest of the world) and Asia centric demand of gas. With capex lined up at Dahej, Kochi and Gangavaram, PLNG is expanding its capacity and venturing in newer markets. Additionally Indian players signing up gas contracts (Ex: GAIL signed up with Fenosa of Spain) augurs well for PLNG as it would provide more gas for re-gasification at its terminals. We remain optimistic of its business and forecast a revenue and PAT CAGR of 31% and 9.6% over FY12-14E respectively. We value the company at 11x FY14 EPS to achieve a price target of Rs187 and maintain our BUY rating on the stock.
Result table
(Rs m) Q2 FY13 Q2 FY12 % yoy Q1 FY13 % qoq
Sales (TBTUs) 117.6 117.9 (0.2) 117.0 0.5
Regas services (TBTUs) 17.3 17.2 0.6 10.0 73.4
Net sales 75,486 53,669 40.7 70,304 7.4
Material costs (69,506) (48,664) 42.8 (65,025) 6.9
Personnel costs (87) (62) 40.5 (71) 22.3
Other overheads (710) (459) 54.6 (637) 11.4
Operating profit 5,184 4,483 15.6 4,571 13.4
OPM (%) 6.9 8.4 (149) bps 6.5 37 bps
Depreciation (467) (463) 0.9 (459) 1.7
Interest (317) (458) (30.9) (329) (3.9)
Other income 248 201 23.1 266 (6.9)
PBT 4,648 3,763 23.5 4,048 14.8
Tax (1,500) (1,160) 29.3 (1,340) 11.9
Effective tax rate (%) 32.3 30.8   33.1  
PAT 3,148 2,603 20.9 2,708 16.2
PAT margin (%) 4.2 4.9 (68) bps 3.9 32 bps
Ann. EPS (Rs) 16.8 13.9 20.9 14.4 16.2
 Source: Company, India Infoline Research
 
Financial Summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues (Rs m) 1,31,973 2,26,959 3,27,189 3,89,135
yoy growth (%) 23.9 72.0 44.2 18.9
Operating profit 12,163 18,292 20,364 23,842
OPM (%) 9.2 8.1 6.2 6.1
Reported PAT (Rs m) 6,197 10,575 11,367 12,703
yoy growth (%)
BSE 245.20 [5.95] ([2.37]%)
NSE 244.95 [6] ([2.39]%)

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