Dolat Capital recommended accumulate rating on Petronet LNG with a target price of Rs 290 in its research report dated June 30, 2020.
Dolat Capital's research report on Petronet LNG
PLL Q4FY20 numbers were below estimates on revenue front as nationwide lockdown was announced in the last 10 days of March, which lead to a slump in demand of gas. Operating profit was below our estimates, due to higher other expenses as they moved to IndAs which included lease impact and forex impact as rupee depreciated by Rs. 4 in Q4FY20. The overall volumes were 219 TBTU in Q4FY20. Volume at Dahej was 206 TBTU, and Kochi volumes and capacity utilization remained low. Given gradual capacity addition and increase in re-gasification margins, PLL is likely to benefit from the gas demand evolution in India. PLL is also poised to benefit from the uptick in gas demand and the setting up of small scale LNG stations which will consume 8-9 MMTPA of LNG.
Outlook
However, Q1FY21 will be a low volume quarter for them as the utilization was low in the month of April, which picked up in May and in June Dahej terminal was running at 100% capacity utilization. We believe the stock should be re-rated, after the completion of pipelines for the Kochi terminal. We maintain our Accumulate rating with a DCF-based target price of Rs 290.
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