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Volumes hit, but outlook remains intact

* PLNG reported a beat in absolute terms, even as operational numbers were below our 4QFY22 estimates. Throughput at Dahej stood at 80%, with a utilization of ~19% at Kochi.

* The company recorded ‘use or pay charges’ of INR832m in 4QFY22. It has been given a credit note of INR1,781m with respect to lower regasification tariff for the Kochi terminal with its customers. Since the latter have now committed additional volumes, the tariff has been revised accordingly.

* Despite the challenges, we remain confident that PLNG will see a utilization of 105%/30% in FY23E. Spot LNG prices fell to USD24.5/mmBtu in Apr’22 v/s USD29.4/mmBtu in 3QFY22 and USD35.4/mmBtu in Mar’22

* Kochi tariff has been cut to INR70/mmBtu (from INR79/mmBtu) from Apr’19. The company has applied for 5% escalation since then, resulting in INR81/mmBtu currently. Dahej capacity is being expanded to 22.5mmtpa over two phases, while Kochi will see a ramp-up in utilization from newly connected consumers.

* We revise up our FY22/FY23 revenue estimate by 15%/14%, led by higher LNG prices. We retain our EBITDA/PAT CAGR of 3% each over FY22-24 and maintain our Buy rating

Beat on EBITDA; volumes disappoint

* Total volumes came in 9% below our estimate at 190Tbtu (down 13% YoY and 9% QoQ). Dahej/Kochi utilization stood at 80%/19% (178Tbtu/12Tbtu).  EBITDA delivered a beat of 13% on our estimate at INR11.7b (+7% YoY, -33% QoQ), with PAT at INR7.5b (16% higher than our estimate, up 20% YoY, but down 34% QoQ).

* EBITDA stood at INR52.5b (+12% YoY), with PAT at INR33.5b (+14% YoY) in FY22. Dahej utilization stood at 90% (-6% YoY), while Kochi utilization rose to 21% from 19% in FY21.

* Income towards ‘use or pay charges’ of INR832m has been recognized on account of lower capacity utilization by its customers.

* In 4QFY22, it has given a credit note of INR1,781m with respect to revenue booked from 1st Apr’19 till 31st Dec’21 by adjusting revenue in 4QFY22.

* This is with respect to lower regasification tariff for the Kochi terminal. Its customers have now committed additional volumes and accordingly the tariff has been revised.

* The company has declared a final dividend of INR4.5/share for FY22

Valuation and view – maintain Buy

* We remain positive on the gas story in India, which is set to clock 6-8% CAGR as per our gas demand-supply model, led by: a) the development of new CGDs, and b) higher consumption by fertilizer and refining and petchem plants.

* Total capex stood at INR2.7b in FY22. The company will set up a petrochemical project, where it will produce PDH-PP (capacity of 500ktpa) and another product as guided in 3QFY22. It will also set up two new tanks at Dahej at a capex of INR12b by CY24.

* A third jetty is being planned at a capex of INR17b. FSRU on the East coast may cost the company INR15b, along with brownfield expansion of 5mmtpa at the Dahej terminal at a cost of INR6b (to be undertaken in phases by CY24 or early CY25).

* The stock trades at 8.9x FY24E EPS and 5.1x FY24E EV/EBITDA. We value PLNG on a DCF basis to arrive at a fair value of INR300 and maintain our Buy rating.

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