Accumulate Petronet LNG; target of Rs 299: Dolat Capital

Dolat Capital's research report on Petronet LNG

Higher volumes were clocked in FY20, due to higher efficiency in operations and expansion of nameplate capacity at Dahej. Last few days of March ’20, was affected due to nationwide lockdown, however normal volumes have bounced back and the Dahej terminal is running at a capacity utilization of close to 100% with industries starting up and higher usage of gas from Power and other industries as spot LNG prices are low. Capacity Utilization at Kochi is low and is expected to improve after the completion of the Kochi-Mangalore pipeline by end of August’20. The capacity utilization of Kochi terminal after completion will reach around 30-35%, which will further boost earnings. Given the gradual capacity addition and increase in re-gasification margins, PLL is likely to benefit from gas demand evolution in India. PLNG is in advance stages of doing investments in Sri Lanka and the Management has also indicated an interest in expanding outside India by acquiring upstream assets. They are also looking at another terminal in the Eastern Coast as currently it is an underpenetrated region and the connectivity issues there have largely been resolved. Setting up small scale LNG stations will further boost volumes. CapEx spent in FY20 is Rs. 1,000 Mn and is expected to spend Rs. 3,480 Mn in FY21, towards setting up of small scale LNG stations and addition of 2 additional tanks and a jetty at Dahej which will take 3 years.

Outlook

We reiterate our Accumulate recommendation, with a target price of Rs 299. (DCF Method).

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