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Petronet LNG Shares Gain As Analysts Stay Optimistic After Q1

Here's what brokerages have made of Petronet LNG’s first-quarter results.

<div class="paragraphs"><p>Image of the Kochi LNG Terminal, operated by Petronet LNG Ltd. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
Image of the Kochi LNG Terminal, operated by Petronet LNG Ltd. (Photographer: Dhiraj Singh/Bloomberg)

Analysts stayed optimistic about Petronet LNG Ltd. as the company tempered down its aggressive capex plan, and on hopes of a recovery in volumes.

Profit rose 5% sequentially to Rs 670.06 crore, according to an exchange filing, surpassing the Bloomberg consensus estimate of Rs 639 crore.

Petronet LNG’s Q1 FY22 Highlights (QoQ, Consolidated)

  • Revenue rose 13.5% to Rs 8,597.90 crore, against a forecast of Rs 8,398 crore.

  • Ebitda dipped 3.6% to Rs 1,051.53 crore compared with Rs 1,091.09 crore.

  • Margin was at 12.23% against 14.40%.

Shares of Petronet LNG Ltd. gained as much as 4.96% to Rs 225.20 apiece around 12:30 p.m. on Tuesday. Of the 38 analysts tracking the company, 27 maintained ‘buy’ and 11 recommended a ‘hold’, according to Bloomberg data. The 12-month consensus price target implies an upside of 22.2%.

Here's what brokerages have made of Petronet LNG’s Q1 results.

Jefferies

  • Maintains ‘buy’ with target price raised to Rs 330, an implied upside of 53.81%.

  • Dahej utilisation fell to 86% due to second wave, but still outperformed estimate.

  • Kochi volumes rose 7% due to pipeline connectivity, but low utilisation remains a concern.

  • Firm volume commitment at Dahej resulting in utilisation level ahead of industry.

  • Company addressed a key area of concern by toning down its aggressive capex guidance.

  • Meaningful correction in spot LNG prices could aid volumes, leading to earnings upgrades.

Haitong International

  • Upgrades to ‘outperform’ from ‘neutral’ with target price at Rs 252, an implied upside of 12.93%.

  • Expects volume to recover from Q2 onwards.

  • Fertiliser and city gas distribution are major demand booster, while demand from power and refineries are stable.

  • Lower capex and revival in volume should likely lead to a boost in valuation.

Key Risks:

  • Significant increase in crude oil/spot LNG price may lead to lower demand for LNG.

  • Sharp decline in Kochi traffic may impact company’s profitability negatively.

Nomura

  • Maintains ‘neutral’ with target price reduced to Rs 235, still an implied upside of 9.53%.

  • Kochi terminal ramp-up has been slower, while Dahej utilisation declined to 87%.

  • India’s LNG imports outlooks remains weak with rising new domestic gas production and elevated LNG prices.

  • Continues to believe that Dahej terminal is vulnerable.

  • Aggressive capex plans seem aspirational at the moment and are likely to be taken negatively by investors.

ICICI Securities

  • Upgrades to ‘hold’ from ‘reduce’, with target price at Rs 213, a potential downside of 4.33%.

  • Dahej utilisation was at four-quarter low of 89% as Covid and spot LNG surge hit demand.

  • Company’s confidence on Dahej volume recovery in FY22-FY23E remains a positive.

  • Company has taken board approval for putting up 20-24 LNG stations and placed order for five stations.

Prabhudas Lilladher

  • Maintains ‘buy’ with target price at Rs 351, a potential upside of 63.60%.

  • Management tempered down its earlier aggressive capex plans to set up LNG stations and CBG plants, a major positive.

  • Company’s long-term contract demand remained robust, while spot LNG accounted for 4% of volumes.

  • Company is play on India’s rising LNG imports and the business model has high earnings visibility.

Opinion
Petronet LNG Q1 Review - Volumes In-Line; Dahej To Recover: Motilal Oswal