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Our view

PLNG’s 4QFY23 reported operating profit at Rs 9.4bn (-25% YoY; +14% QoQ) missed our and street estimates on account of higher than estimated operating expenses during the quarter. PAT while QoQ higher on adjusted basis, stood 48% lower QoQ on reported basis, as the 3QFY23 included the ‘Use or Pay’ revenue of Rs 8.5bn for CY22. The same remains a recoverable as of date and PLNG is negotiating with concerned parties for the same. The Dahej terminal utilization improved QoQ to 77% (3Q: 69%) as moderation in LNG prices helped revive the demand and import of LNG. We believe that while there could be challenges in the near term to due to volatile LNG price environment, given the macro-economic factors but the in longer India’s dependence on imported LNG is set to rise. In addition, PLNG is investing in brownfield and greenfield projects to cement its position in the LNG import market. Maintain BUY.

Result Highlights

* Profitability: Adj. Ebitda and Adj. PAT during the quarter, stood at Rs 9.43bn (-25% YoY; +14% QoQ) and Rs 6.1bn (-27% YoY; +85% QoQ), below estimates on higher other operating expense. Operating expense at Rs 2597mn (+57% YoY & +87% QoQ) stood higher due to provision for one time arbitration related expense.
* LNG throughput: The total throughput stood QoQ higher and in-line with our expectations at 185 mmbtu (-3% YoY & +11% QoQ). Correction in LNG prices over 4QFY23, helped in recovery in consumption and import of LNG. The total throughput for FY23 stood at 752tbtu (-11% YoY).
* Dahej Terminal: Dahej throughput for the quarter stood at 172tbtu (3Q: 154tbtu), implying a utilization of 77% (3Q: 69%). The cargo mix included 108tbtu of LT (3Q: 104tbtu), 3.0tbtu of ST (3Q: 3tbtu) and 61tbtu (3Q:47tbtu) of Service cargo. The LT cargo also included 9.7tbtu of Gorgon LNG cargo meant for Kochi Terminal, diverted to Dahej. The current tariff rate at Dahej terminal stands at Rs 59.9/mmbtu and the implied tariff for service cargoes at Rs 59/mmbtu (3Q: Rs 56.0/mmbtu).
* Kochi Terminal: Kochi throughput for the quarter stood at 13tbtu (3Q: 13tbtu), implying a utilization of 20% for the quarter. The cargo mix included only 13tbtu (3Q:13tbtu) of LT cargo. The tariff at Kochi terminal stood at Rs 81.03/mmbtu.
* Capex: The capex for FY23 stood at Rs 9.5bn and the same for FY24 is projected at Rs 17-18bn. The key programs undertaken/planned are a) ongoing, Rs 35bn capacity expansion of Dahej terminal by 5mmt, b) Rs 23bn construction and commissioning of Gopalpur terminal, where PLNG has taken board approval and is in process of taking environmental and other procedural approvals and c) Rs 130- 140bn PDH -PP project , which is still is early stages of planning with board approval pending for the same.

Valuation

We value PLNG at Mar 24 TP of Rs 315/sh on DCF basis, implying a target PE multiple of 15x FY25e, vs 11x the stock is trading at.

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