Petronet LNG (PLNG) reported its Q4 FY13 revenues at Rs84.6bn implying a growth of 32.8% yoy and 0.5% qoq. The revenues came in line with our estimates on back of weak volume performance guided by the management. During the quarter, high LNG prices sharply affected the spot volumes and regas cargo volumes (by GAIL, GSPC) processed by PLNG. Total volumes handled in the quarter were 122tbtu, which were down by 13.5% qoq and 9% yoy. Management informed that LNG prices have now retracted to ~US$14/mmbtu levels and gas offtake is expected to be better going ahead.
Weak volumes in the quarter affected the profitability and the OPM came in weaker at 5.1%, declining 115bps sequentially and 150bps yoy. The OPM was lower than our estimates owing to higher than expected raw material costs. Material costs (as % of sales) rose by 100ps qoq and 154 bps yoy. Further, lower proportion of re-gasification and spot cargos led to the sequential decline in OPM. PAT at Rs2,451mn was lower than our estimates remaining flat yoy and declining by 23% qoq.
|As a % of net sales||Q4 FY13||Q4 FY12||bps yoy||Q3 FY13||bps qoq|
- Key conference call takeaways:
- Kochi terminal: The commissioning of Kochi terminal is now expected to be done in mid July 2013 as management informed of its customer FACT getting its conversion facilities in place. Additionally installation of low pressure pumps (owing to low volumes initially) is ongoing at Kochi terminal and thereby the commissioning would be done in July 2013 now. We build in low volumes (0.5mtpa) for the first year before the phase-2 connects the major off takers to the terminal. We note that the re-gasification charge for the initial years would be Rs62/mmbtu with a 5% annual hike. It was higher than the earlier guidance of ~$1/mmbtu.
- Phase 2 pipeline (Karnataka via Tamil-Nadu) update: On the phase 2 pipeline, we note that pipeline is being constructed in Kerela at a good pace while some issues remain in Tamil Nadu which are being looked into. We expect the pipeline to be finished by FY14 end, and build in throughput increase at Kochi terminal only in FY15.
- 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 mid 2013 and the target for project is end of 2016. On the re-gasification charges, management informed of having implemented the 5% yearly hike in charges in Q4 FY13.
- Gangavaram project: The management reiterated its plan to hire a FSRU (temporary floating re-gasification unit) by end of CY14 with a capacity to handle 2-3mtpa before the land based unit comes up.
- United gas LNG pact: PLNG has reached a conditional agreement with United LNG for the supply of 4mtpa LNG linked to henry hub prices. However the deal is in very preliminary stage and subject to approval of DoE (USA Department of Energy) for export of gas to non FTA countries.
We believe that Petronet remains the best play on the current attractive dynamics in the domestic gas industry. With minimized regulatory threat and large percentage of volumes locked in long term contracts we note superior visibility in the business of the company. The stock has witnessed weakness recently owing to delays in Kochi terminal commissioning and phase-2 pipeline construction. However we believe the fundamentals remain intact and recommend BUY on the stock with a price target of Rs187.
|(Rs m)||Q4 FY13||Q4 FY12||% yoy||Q3 FY13||% qoq|
|Regas services (TBTUs)||3.7||15.0||(75.3)||14.0||(73.6)|
|OPM (%)||5.1||6.6||(150) bps||6.3||(115) bps|
|Effective tax rate (%)||36.0||32.9||31.9|
|PAT margin (%)||2.9||3.8||(95) bps||3.8||(89) bps|
|Ann. EPS (Rs)||13.1||13.1||0.0||17.0||(23.0)|
|Y/e 31 Mar (Rs m)||FY12||FY13||FY14E||FY15E|
|Revenues (Rs m)||226,959||314,674||376,656||464,988|
|yoy growth (%)||72.0||
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