Buy Petronet LNG For Target Rs 360 By Emkay Global Financial Services Ltd
PLNG reported Q4FY26 SA adjusted EBITDA/APAT of Rs13.7bn/9.7bn, up 2% QoQ each and 21%/22% above our estimates, driven by better-than-expected volumes and higher implied margins (10% EBITDA/mmbtu beat). Dahej utilization in Q4 was decent at 90.1%, though it dropped to ~53% in Mar-26 due to supply disruption. Utilization is improving, supported by recovery in tolling volumes amid softening of spot LNG prices and stronger power segment demand. Also, Exxon II and Deepak Fertilisers contracts would add ~1mmtpa of volumes this year, partly offsetting supply disruption. Kochi utilization was slightly lower, at 28% in Q4. The company expects supplies from QatarEnergy (QE) to resume within 3-4 weeks of conflict resolution, as PLNG’s supplying trains are unaffected. PLNG received Rs6.3bn of UoP dues pertaining to CY22, with net impairment reversal of Rs5.5bn. FY27/FY28 capex target is Rs90/80- 100bn. We cut FY27E earnings by 16%, factoring in a four-month disruption in QE supplies, while retaining FY28E EPS. We retain BUY and TP of Rs360.
Results highlights
Service volume at Dahej rose 5% QoQ to 125tbtu; however, long-term volumes fell 23% QoQ to 70tbtu, due to force majeure in Mar-26. Spot volumes stood at 6tbtu in Q4. Total volume was up 7% YoY/down 6% QoQ at 219tbtu (11% beat). Implied marketing margin on spot LNG declined to ~USD3.7/mmbtu (vs USD4.2/mmbtu in Q3). Inventory/trading gains stood at Rs950mn/1.2bn. Adjusted employee cost was down 16% QoQ to Rs566mn (up 21% YoY), while other expenditure rose 73% YoY/ 56% QoQ to Rs2.7bn (9% above estimate), on higher forex losses. Adjusted EBITDA/mmbtu was up 9% QoQ to Rs62.4 (flat YoY). D/A was down 4% QoQ to Rs2.1bn, while other income of Rs2.0bn was largely flat YoY but down 7% QoQ and 4% miss. RPAT stood at Rs13.4bn. FY26 capex was Rs27.3bn, with Rs16.5bn allocated to the petchem project. FY26 EBITDA/APAT declined 8%/7% YoY to Rs52.7bn/37.9bn, due to 4% YoY decline in volumes and EBITDA/mmbtu. The Board recommended a final dividend of Rs3/share.
Management KTAs
Dahej utilization was strong at 108% in Jan/Feb-26, but dipped in Mar-26 due to force majeure. However, the situation is improving, with current utilization in line with or slightly above Mar-26 level. Additional 5–6mmscmd of volumes, as guided by GGL, could drive ~6% volume growth, though its sustainability remains uncertain. Expanded capacity at Dahej was commissioned by Q4FY26-end, except for one unit slated for Q1FY27. PLNG is actively engaging with offtakers for FY28 contract renewals. The petchem project remains on track, with no disruption to capital equipment supplies; FY27 capex target for the project is Rs75bn. PLNG plans to build 2 tanks at Gopalpur and is setting up 1 at Kochi (for Rs12bn). At Dahej, 3–4 more tanks are under consideration.
Valuation
We value PLNG using DCF analysis. Our TP implies ~11.1x Mar-28E target P/E. Key risks: adverse petroleum/gas prices, competition, project delays, and capital misallocation
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