IGI Logo

Dahej volumes better than expected; significant capex lined up

* Q4FY21 standalone EBITDA/PAT of Rs10.91bn/6.23bn were up 56%/74% yoy and down 18%/29% qoq but 3% above/8% below our estimates. Volumes were a 6% beat. The PAT miss was due to lower Other Income (down 43% yoy/56% qoq) and higher ETR of 27%.

* The Dahej terminal operated at 93% capacity, above our 88% est. Long-term/spot/tolling volumes fell 10%/was flat/fell 7% qoq to 102tbtu/5tbtu/97tbtu. Kochi utilization was 22% (21% est.). EBITDA/mmbtu fell 12% qoq to Rs50.1 (2% miss, up 57% yoy).

* Management stated Rs52bn of core capex in next five years, along with Rs40bn/80bn in compressed biogas/LNG retail, which are promising sectors but with low earnings visibility. Weak Q1FY22 utilization and offtakers asking for Dahej tariff in Kochi are dampeners.

* We cut FY22/23E EPS by 13%/11%, assuming lower volumes and Kochi tariffs. We also increase WACC and capex though not building retail/CBG into our earnings model. We hence lower our DCF-based TP by 15% to Rs290. Maintain Buy but with EW stance.

Q4FY21 highlights:

Other Expenditure jumped 39% qoq to Rs1.6bn (down 61% yoy but 33% above est.) due to Rs180mn of forex loss and Rs560mn on CSR. Employee cost, interest and depreciation were also somewhat higher than our expectations. Total volumes were flat yoy/down 7% qoq at 218tbtu. Implied marketing margin on spot LNG is estimated at USD2.2/mmbtu. Four years of use or pay charges totaling Rs1.98bn (ex GST) invoked against three tolling users had been booked but only Rs545mn has been paid so far. Discussions are on, and PLNG expects resolution with no material impact.

For FY21, PLNG’s EBITDA/APAT stood at RsRs47.0bn/29.5bn, up 18% each with a 22% jump in EBITDA/mmbtu and a 17% reduction in interest cost. Volume declined 3% yoy. The board recommended Rs3.5/sh final dividend, with total of Rs11.5/sh, implying 58% payout (70% in FY20). Share of profits from assoc./JVs increased from Rs147.5mn in FY20 to Rs189.3mn in FY21 (Rs145.5mn in Q4).

Guidance:

April-May’21 Dahej utilization had been weak due to lockdown. Currently, it has recovered to 88% utilization. PLNG wants higher Kochi volumes for lowering tariffs. The Bangalore pipeline is progressing, with only 250km stretch from Coimbatore is pending (will take 1.5 years to complete). Dividend payout in FY21 was slightly down as PLNG has huge growth capex plans and wants to build reserves. Capex target for FY22/23 is Rs5.3bn/10bn+. PLNG wants to go mostly alone in LNG retail, with 3.5mmtpa volume target by CY30 from 1,000+ stations. 80 CBG LoIs have been received from OMCs-CGDs. A new Kochi tank is planned to benefit from market arbitrage. Sri Lanka terminal is dampened by new proposal to set up deep sea FSRU.

Valuation:

Our Rs290 TP implies a 15.0x FY23E target PE multiple. Key risks are adverse petroleum/gas prices, slowdown, competition and capital misallocation.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer