KR Choksey is bullish on Petronet LNG has recommended buy rating on the stock with a target price of Rs 317 in its research report dated February 04, 2019.
KR Choksey's research report on Petronet LNG
Net sales came in at INR 100.9 bn (+30.2% YoY, -6.0% QoQ). Total volumes processed came in at 202 TBTU (217 TBTU in Q2FY19 and 223 TBTU in Q3FY18). Higher spot gas prices for the quarter resulting in higher RMAT (+34.7% YoY) impacted the gross margins on a YoY basis (-302 bps) to 9.9%. Employee expenses for the quarter increased by 34.9% YoY but declined by 38.2% QoQ. The YoY increase was partially negated by lower other expenses (-7.4% YoY) which resulted into an operational performance of 8.4% (-252 bps YoY, +17 bps QoQ). EBITDA came in at INR 8.48 bn (+0.1% YoY, -4.0% QoQ). Lower finance cost (-41.2% YoY) and higher other income (+113.6% YoY) contributed to improvement in the bottom-line performance which came to INR 5.65 bn (+6.9% YoY, +0.4% QoQ). Tax expense declined QoQ to 30.3% (35.0% in Q2FY19) due to tax holiday claimed by PLNG. NPM declined by 122 bps to 5.6% (+36 bps QoQ).
Outlook
At a CMP of INR 209, PLNG is trading at an attractive valuation of 12.6x FY19E EPS and 10.6x FY20E EPS. We valued the company by assigning a P/E multiple of 16x on the FY20E EPS of INR 19.8 and arrived at a target price of INR 317.0 (potential upside – 51.6% ) from our earlier estimate of INR 285. We maintain BUY rating on the stock.
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