Sequential improvement in demand..
Petronet LNG was formed by the Indian government to import liquefied natural gas (LNG) and set up LNG terminals in India. The company operates two regasification terminals situated in Dahej (17.5 MMTPA installed capacity) and Kochi (5 MMTPA).
* Q2FY21 sales were down 33.4% YoY to Rs. 6,236cr. The company registered adjusted PAT decline of 20.8% YoY, reaching Rs. 919cr.
* EBITDA margin improved by 950bps YoY to 21.9%, primarily due to reduction in operating cost and effective commercial planning.
* Petronet LNG’s volume demand reaching pre-COVID levels, improvement in operational efficiency, and commissioning of the Kochi-Mangalore pipeline will boost performance in upcoming quarters. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs. 327 based on 15.0x FY22E adj. EPS.
Operational efficiency improved operating margins
PLNG’s Q2FY21 revenue fell 33.4% YoY to Rs. 6,236cr (+27.7% QoQ), on lower gas prices partially offset by increase in LNG volumes processed (1.6% YoY to 254 TBTUs). Dahej terminal processed 243 TBTUs, a rise of 1.3% YoY. On sequential basis, total throughput processed increased by 33.7% and Dahej terminal throughput rose 34.3%, with increase in demand to pre-COVID levels and strong operation efficiency. EBITDA increased 17.5% YoY to Rs. 1,363cr along with margin expansion of 950bps YoY to 21.9%, driven by decline in cost of sales as a percentage of sales by 10pps YoY (inventory impact of Rs. 60cr from the rise in spot prices by US$ 3). However, PAT reduced 15.6% YoY to Rs. 919cr, owing to higher corporate taxes of Rs. 315cr (vs. Rs. 218cr of tax benefit in Q2FY20), partially aided by increase in other income by 60.3% YoY to Rs. 142cr.
Key concall highlights
* Dahej terminal operated at 109% compared to 81% in Q1FY21 and Kochi terminal operated at 17% during the quarter.
* The company declared special interim dividend of Rs. 8.0 per share compared to Rs. 5.5 per share in Q2FY20.
* Regasification revenue rose 7.4% YoY to Rs. 678cr (+35.6% QoQ), driven by strong volume growth.
* The company has planned maintenance activities in 2HFY21 and operating expenses are expected to be same as 1HFY21 in the remainder of the year.
Petronet LNG future plans
Petronet LNG is planning to expand its Dahej terminal capacity to 19.5 MMTA in next 3-4 years to increase the volume, as currently the terminal is operating at more than 100% capacity. GAIL has completed the Kochi-Mangalore pipeline project of 540m stretch. This will allow PLNG to increase capacity utilization to 25-30% after the commissioning as around 4.5 MMTPA of capacity remains idle.
From Q2FY21 the demand from refining, fertilizers, and other segments has started increasing, gradually reaching pre-COVID levels. GAIL completed Kochi-Mangalore pipeline, which will boost the company’s utilization rate and operational efficiency. Moreover, Dahej terminal has also now started operations at full capacity. Hence, we reiterate our BUY rating on the stock with a target price of Rs. 327, based on 15.0x FY22E adj. EPS.
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