Sharekhan has given Buy recommendation for Petronet LNG with a target price of Rs. 285 in its research report issued on Sep 09, 2021
Sharekhan’s research report on Petronet LNG
PLNG’s Dahej terminal utilisation likely to recover to near full utilisation in Q2FY22 as demand for contracted LNG (available at half of spot LNG price) is believed to have picked up and shift of volume from Dabhol LNG during the monsoon. Capex would be focused on Dahej capacity expansion to 22.5 mtpa by FY25E and spends on LNG retailing/CBG plants would in calibrated manner. FY21 annual report indicates plans to set-up ethane/propane import facility and petrochemical complex at Dahej. No major concern on PLNG’s volume (although there may be volatility on quarterly basis) from ramp-up in domestic gas production as 16.5 mtpa of its Dahej capacity is booked under contracts. Volume visibility and 5% annual re-gas tariff hike to drive a 9% PAT CAGR over FY2021-FY2024E.
We maintain Buy on PLNG with an unchanged PT of Rs. 285 as valuation seems attractive at 9.8x its FY23E EPS, considering decent earnings growth visibility, best RoE among gas utilities and FCF/Dividend yield of ~9%/~6%.