Sharekhan has given Buy recommendation for Petronet LNG with a target price of Rs. 300 in its research report issued on Feb 12, 2021
Sharekhan’s research report on Petronet LNG
Robust Q3FY2021 results with 17% beat in operating profit at Rs. 1,335 crore, led by better cost management and inventory/trading gain of Rs. 60 crore/Rs. 54 crore on spot volumes. Kochi-Mangalore pipeline commissioned in November 2020, which would improve utilisation level of Kochi LNG terminal to 30% by Q3FY2022. Further ramp-up to 50%-60% likely with completion of Kochi-Bangalore pipeline section over the next 2-3 years. Notwithstanding slight moderation in Dahej utilisation in Q4FY2021, we believe PLNG is well positioned to tap India’s rising LNG consumption with 5mmt expansion at Dahej terminal in two phases over the next 3-4 years. Focus on LNG fuel retailing and compressed biogas to aid in long-term volume growth.
Valuation is attractive at 9.9x its FY2023E EPS, given earnings visibility, high RoE, and FCF/Dividend yield of 9%/6%. PLNG’s non-regulated business model should command superior valuation. We maintain Buy on PLNG with an unchanged PT of Rs. 300.