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1Q sequentially weaker but prognosis better

Result Highlights‐ miss on estimates on weaker throughput  

* 1QFY22 Profitability: The PAT stood at Rs 6.36bn (+22% YoY; +2% QoQ) and the operating profit (EBITDA) stood at Rs 10.5bn (+16% YoY;  ‐3% QoQ). The profitability was sequentially lower on 4% QoQ lower throughput as Covid  ‐2nd wave and high spot LNG prices weighed on demand.  

* LNG throughput: The total throughput at 209tbtu stood 10% higher YoY but 4% lower QoQ and also below our estimates. The decline primarily stemmed from lower utilization of 87% (4Q: 91%), at Dahej terminal. The domestic LNG import also declined by 6.8% QoQ during the quarter and accordingly PLNG was also impacted. For the quarter the cargo mix included 100tbtu (4Q: 113tbtu) of Long Term (LT) and 8tbtu (4Q: 7tbtu) of short term (ST) cargo and  101tbtu (4Q: 98tbtu)   of re‐gas (RS) service volume, across Dahej and Kochi terminals

* Dahej Terminal: Dahej throughput for the 1QFY22 stood at 194tbtu (4Q: 204tbtu), implying a utilization of 87%. The cargo mix included 89tbtu of LT, 6tbtu of ST and 99tbtu of Service cargo. The current tariff rate at Dahej terminal stands at Rs 57/mmbtu.  

* Kochi Terminal: Kochi throughput for the quarter stood at 15tbtu (4Q: 14tbtu), implying a utilization of 24% for the quarter. The cargo mix included 11tbtu of LT, and 2tbtu each of ST and Service cargoes. Around ~6 LT cagoes meant for Kochi were diverted to Dahej during the quarter (4Q: 9).  The current tariff rate at Kochi terminal stands at Rs 87.2/mmbtu.

* Capex: PLNG incurred a capex of Rs 5.3bn for FY21 and has plans to invest Rs 5bn in FY22 and Rs 10bn in FY23.

View & Valuation

The 1QFY22 earnings for PLNG stood below our estimates; the miss primarily stemmed from lower than estimated LNG throughput and higher operating expense. Abnormally higher spot LNG prices along with Covid‐2nd wave, during the quarter, impacted LNG imports in India, leading to weaker utilization for PLNG as well.  

However, as we write terminal utilization for PLNG has improved, as localized lockdowns across the country ease and demand improves. While high spot LNG prices are still a headwind, but PLNG expects higher demand for relatively cheaper LT cargo to offset the same. In addition, we believe that near term disruptions apart, the long‐ term prospects for growth in LNG consumption in the country remains strong as IEA, expects LNG imports in India to rise by 1.5x by 2025.  

In that backdrop we maintain our BUY rating on PLNG with a revised Mar’23 TP of Rs 350/sh as we find the stock attractively valued, trading at just 9x FY24e. However, key challenges, for PLNG in coming quarters are a) increase in domestic production as KG basin assets of RIL and ONGC ramp‐up production and b) commissioning of additional re‐gas terminals in the country.  

While PLNG’s base line business is protected due to tolling contracts of ~16.5mmt, but incremental business could face risk to aforementioned factors. That said, we believe that current valuations are adequately factoring in the same and we remain optimistic about long term potential for LNG consumption in the country and therefore earnings growth prospects for PLNG.

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