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For Q3FY24, PLNG reported adj. EBITDA of Rs13.2bn, a 13% beat, led by betterthan-expected spot margins. PLNG booked Rs6.1bn of take or pay for CY23 and provisioned Rs2.3bn w.r.t. CY21-22. The board has approved recovery of the same and PLNG has sought BGs from offtakers, besides asking shortfall volumes to be met through excess offtake within three years. Dahej/Kochi terminal utilization was slightly higher than expected at 97%/22%. PLNG’s APAT stood at Rs9.1bn, up 11% QoQ and a 14% beat. Adj. EBITDA/mmbtu rose 15% YoY and 5% QoQ to Rs57.1. We raise FY24-26E earnings by 1-4% each on slightly higher volumes. We roll over to Dec-25E but raise our Dec-24 DCF-based TP by 23% to Rs300, building annual tariff revision of 2-3% for 10yrs beyond FY28 (vs. flat tariff earlier) as QatarGas renewal announcement nears. Retain BUY.

Result Highlights

Service volume at Dahej rose 8% QoQ to 110tbtu, while long-term volumes were up 2%. Spot volumes fell to 4tbtu from 6tbtu QoQ. Total volume rose 4% QoQ to 232tbtu. Implied marketing margin on spot LNG rose to ~USD7.0/mmbtu (vs. ~USD3/mmbtu QoQ) on higher inventory and trading gains. PLNG’s trading income stood at Rs400mn in Q3FY24 (vs. Rs190mn/Rs130mn in Q2FY24/Q1FY24), while inventory gain was Rs1.47bn. Employee cost rose 12% YoY/13% QoQ to Rs502mn, while adjusted other expenditure fell 27% YoY/12% QoQ to Rs1.45bn (3% below our estimate). Other income rose 50% YoY to Rs1.56bn. The share of profit from JVs rose 11% YoY to Rs227mn. Balance confirmation of Rs4.2/8.5bn of CY21/22 take or pay is yet to be received.

Management KTAs

The 5% tariff hike in Dahej has been taken in Jan-24. Renewal of QatarGas contract is underway and the same will be announced accordingly. Dahej’s 5mmtpa expansion is on schedule for Mar-Apr 2025 commissioning. Gopalpur terminal will take three years to build, though FSRU availability is poor, and PLNG may have to go for land-based terminal. Management expects Kochi connectivity to the national grid by CY24-end as per GAIL’s guidance. Management has raised settlement for take or pay with offtakers with threeyear volume adjustment but has sought BGs (on the entire amount) based on recovery mechanism approved by the board. The settlement mechanism is agreed upon by all offtakers, including GSPC, BPCL, IOCL, & Torrent and some of them have already submitted BGs. Offtakers are seen making efforts for additional volumes.

Valuation

We value PLNG using the DCF analysis. Our TP implies a ~13x Dec-25E target P/E. We maintain BUY on reasonably attractive valuations and ~5% dividend yield. Key risks: Adverse petroleum/gas prices, competition, project delays, and capital misallocation.

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