Petronet LNG (Q2 FY14)

India Infoline News Service | Mumbai |

Petronet LNG (PLNG) reported its Q2 FY14 revenues at Rs94.9bn implying a growth of 25.8% yoy and 12.4% qoq.

CMP Rs125, Target Rs140, Upside 12.0%
 
  • Petronet LNG (PLNG) reported its Q2 FY14 revenues at Rs94.9bn implying a growth of 25.8% yoy and 12.4% qoq. The revenues were in line with our estimates. The growth was primarily on account of higher prices of LNG and steep rupee depreciation. The volumes were however lower and the Dahej terminal operated at 97% utilization levels. While Long term volumes were higher by 8.6% yoy, short term volumes fell by 56% yoy and tolling volumes reduced by 27.9% yoy. Total volumes were at 122.5TBTUs of which 98TBTUs were long term contracts, 12TBTUs were short term/Spot cargos and 12.5TBTUs were regas/tolling cargos.

  • With total volumes falling 9.2% yoy, the impact of operating deleverage was seen in OPM falling by 303bps yoy and 88bps qoq. OPM was 50bps below our estimate as volumes were lower than expected. Operating profit of Rs3.6bn was lowest since Q4 FY11.

  • During the quarter Kochi Terminal commenced operations and the plant operated for 20 days. Consequently, depreciation and interest expenses related to the plant got accounted in the P&L. The company capitalized Rs42bn worth of assets and expects another Rs2bn to get added in the near term.

  • PAT at Rs1,817mn was lower than our estimates and lowest since Q3 FY11, declining 42.3% yoy and 19.3% qoq.

Cost analysis
As a % of net sales
Q2 FY14
Q2 FY13
bps yoy
Q1 FY14
bps qoq
Material costs
95.1
92.1
306
94.3
88
Personnel Costs
0.1
0.1
(3)
0.1
(2)
Other overheads
0.9
0.9
1
0.9
2
Total costs
96.2
93.1
303
95.3
88
Source: Company, India Infoline Research
  • Key project updates:
  • Kochi terminal: The plant commenced operations during Q2 FY14 and the management expects that utilization levels will remain in the region of 7-8% over the next one year. The company is hopeful of the pipeline to Mangalore getting connected within next one year, which can shore up volumes by about 1.2mtpa. For the quarter the company reported a loss of Rs350mn for the Kochi terminal.
  • Dahej expansion: Work on Dahej second jetty is ongoing and it is expected to be ready before March 2014. It would enable more flexibility for PLNG and we incrementally build in 1mtpa volumes from FY15 at Dahej terminal. On regas capacity expansion, EPC contracts are expected to be awarded in the near term and the target for project is end of 2016. 
  • We have liked Petronet LNG’s business model owing to minimized regulatory threat and large percentage of volumes locked in long term contracts giving us superior visibility in the business of the company. However significant project delays in the Kochi pipeline would mean the uptick in volumes would be delayed beyond FY15. We cut our FY15 volume assumptions on back of low utilization levels expected at Kochi. The recent correction in stock price however factors in these negatives in our view and we note the stock trades at P/E of 9.1x FY15E EPS. We maintain BUY with a revised 9-month target price of Rs140.   
 
Result table
(Rs m)
Q2 FY14
Q2 FY13
% yoy
Q1 FY14
% qoq
Sales (TBTUs)
110.0
117.6
(6.5)
111.2
(1.1)
Regas services (TBTUs)
12.5
17.3
(27.9)
18.3
(31.6)
Net sales
94,935
75,486
25.8
84,442
12.4
Material costs
(90,316)
(69,506)
29.9
(79,593)
13.5
Personnel costs
(80)
(87)
(7.6)
(86)
(6.9)
Other overheads
(900)
(710)
26.8
(785)
14.6
Operating profit
3,639
5,184
(29.8)
3,978
(8.5)
OPM (%)
3.8
6.9
(303) bps
4.7
(88) bps
Depreciation
(597)
(467)
27.7
(467)
27.8
Interest
(386)
(317)
22.1
(240)
60.9
Other income
161
248
(34.8)
152
5.9
PBT
BSE 251.15 0.95 (0.38%)
NSE 250.95 1.10 (0.44%)

***Note: This is a NSE Chart

 

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