Accumulate Petronet LNG Ltd For Target Rs.326 By Elara Capital
Dahej firm; Kochi continues to improve
The stock price of Petronet LNG (PLNG IN) was up 4% in the past three months, outperforming the benchmark NSE Mid-Cap Index (down 2%), as the market had priced-in the upcoming Dahej capacity expansion by 5mn tonne and improving Kochi utilization. PLNG delivered a healthy Q3FY26 with stable volume at Dahej and a gradual volume uptick at Kochi, while management remains focused on executing the Dahej capacity expansion and large petrochemicals foray. In Q3FY26, total Regas throughput was 233TBTU, led by Dahej at 214TBTU (~94% utilization). Kochi throughput rose to 19TBTU (up 27% YoY, ~29% utilization; the highest to date), helped by softer LNG prices and incremental offtake from existing customers (primarily refiners). Based on 9MFY26 earnings trend and management commentary, we cut FY26E EPS by 5%. We rollover TP to FY28 estimates, and, therefore, we raise our TP to INR 326 and upgrade rating to Accumulate, due to visible catalysts emerging like Dahej capacity expansion during Q4FY26, Kochi-Bangalore pipeline commissioning by Q1FY27, and likely ~52mn tonne global LNG exports capacity (~12% of world LNG trade) addition in 2026.
Earnings flat YoY on slight volume uptick: Q3 adjusted PAT was flat YoY at INR 9.9bn, higher than our estimates of INR 8.2bn. The company reported an impairment loss of INR 1.6bn toward “use or pay” charges recovery vs impairment losses of INR 1.6bn in Q2FY26 and INR 1.5bn in Q3FY25. Reported PAT stood at INR 8.5bn
Flat utilization for the Dahej terminal; up for Kochi: In Q3, LNG import volume at Dahej terminal stood at 214TBTU vs our estimates of 190TBTU. Dahej volume was flat YoY, as tolling volume was up 4% and contracted volume was down 5%. Volume the from Kochi terminal was up 27% YoY to 19TBTU, due to higher offtake by BPCL, MRPL and OMPL.
New offtake contracts at the Dahej terminal and the Kochi-Bengaluru pipeline to be key: Management is closely working with customers to book expanded Dahej capacity (to come onstream by March 2026). Land for the Gopalpur LNG terminal (east coast) has been acquired. PLNG would resubmit environmental clearance, so the timeline for this terminal would depend on regulatory authority. Once the Kochi-Bengaluru pipeline is completed and the Kochi terminal gets connected to the National Gas grid, and LNG prices soften, utilization at the Kochi pipeline should go up significantly to ~30-50% from 10-20%.
Upgrade to Accumulate with a higher TP of INR 326: We pare down FY26E EPS by 5% on reported 9MFY26 financials and lower Dahej volume. We rollover our TP to FY28 estimates. Hence, we raise our TP to INR 326 from INR 293. We upgrade our rating to Accumulate from Reduce, due to visible catalysts emerging like Dahej capacity expansion during Q4FY26, Kochi-Bangalore pipeline commissioning by Q1FY27, and expected ~52mn ton global LNG export capacity (~12% of world LNG trade) addition in 2026. Our TP assumes a 100% capacity utilization for the existing 17.5mn tonne Dahej plant and slow ramp-up of expanded 5mn tonne capacity in the long-term. We value PLNG based on a DCF method at a 9.0% (unchanged) cost of equity.
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SEBI Registration number is INH000000933
