Hold Petronet LNG; target of Rs 275: ICICI Direct

ICICI Direct's research report on Petronet LNG

Petronet LNG reported Q2FY21 results that was better than our estimates on volume and profitability front. Total volumes were up 1.6% YoY, 33.7% QoQ to 254 tbtu on account of higher regas volumes. Revenues were down 33.4% YoY to Rs 6235.8 crore (our estimate: Rs 6504.2 crore). EBITDA was at Rs 1363.2 crore, up 17.5% YoY, 49.8% QoQ (our estimate: Rs 1133.4 crore). Blended margins were at Rs 59.7/mmbtu on account of inventory gains and higher margin on spot volumes (our estimate: Rs 53.9/mmbtu). PAT fell 15.9% YoY to Rs 927.3 crore (our estimate: Rs 678.8 crore) as the company had negative tax outgo in Q2FY20. On a QoQ basis, it increased 78.2%.

Outlook

However, additional capacity from new terminals on the west coast (Mundra, Dabhol) and lack of new investment opportunities will limit volume growth from FY22E. We change our recommendation from BUY to HOLD on the stock. We value Petronet LNG at 12.5x FY22E EPS of Rs 21.9 to arrive at a target price of Rs 275.

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