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Stable volumes, margins drove adjusted earnings beat

PLNG posted Q2FY26 standalone adjusted EBITDA/APAT of Rs12.7/9.2bn, down 2%/3% QoQ, although at 8%/11% beat, respectively, on better implied margins (7% EBITDA/mmbtu beat). Total LNG volumes rose 4% QoQ to 228tbtu (1% beat), with Dahej’s utilization at 94% (in line) and Kochi’s at 27% (vs 25% estimated), aided by 3tbtu of BPCL refinery’s service volumes. Other expenses grew 52% YoY/72% QoQ to Rs2.3bn due to forex losses of Rs840mn. The Board extended MD/Director Technical’s tenures to May/Nov-27, respectively. Dahej’s 5mmtpa expansion would be commissioned by Mar-26; discussions for capacity tie-ups are on. Supplies from Gorgon’s phase 2 would start from Mar-26. The QatarGas offtakers agreement should be done by March, along with completion of the KochiBengaluru pipeline. PLNG’s major offtakers are going for term contracts; from 2026, this will help reduce volume volatility from spot LNG pricing. We reduce FY26E EPS by 4%, slightly lowering our volume assumption, while making key changes in our model, building in PDH-PP, ethane-propane handling, and Gopalpur terminal in our standalone long-term estimates and DCF valuation. We, thus, lower our rolled over Sep-26E TP by 8% to Rs360 and retain BUY.

Result highlights

PLNG’s impairment adjustment (UoP provision-waiver) was Rs1.6bn and RPAT was Rs8.1bn. Dahej’s long-term volumes fell 10% QoQ, although offset by a 14% rise in service volume. There was no spot volume. Other income rose 18% YoY to Rs2.4bn, a 12% beat. The MD and Director Technical were slated to retire by Feb-26 and Nov-26, respectively. However, their tenures would be extended, subject to shareholders’ approval. Interim dividend of Rs7/share was declared, similar on a YoY basis.

Management KTAs

Current volumes are in the same range as those in Q2. PLNG has acquired land for the Gopalpur terminal and EC has been re-submitted, with clearance expected any time now; post the clearance, it will take 3 years to be ready. FY26 capex guidance is retained at Rs50bn, with a major portion to be on petchem. Petchem will see major capex in H2 as some packages are in advanced stages of awarding; some LLIs are already awarded, beside the start of civil works. The recovery of Use or Pay dues is per the settlement mechanism and BG encashment; settlement happens in Q4 of the fiscal year.

Valuation

We made key changes in our model, building in PDH-PP, ethane-propane handling projects, and Gopalpur LNG terminal in our standalone long-term estimates and DCF valuation. We build in Gopalpur from FY30E, with 5% utilization, ramping it up and capping it at 30% over the next 10 years. For PDH-PP, we have built a conservative USD100/mt steady-state EBITDA due to a lack of clarity on margins; for ethane-propane handling though, we have built in Rs2.5-3.0bn of EBITDA pa. We value PLNG using DCF analysis, building in the above project capex with conservative earnings. We lower our TP by 8% to Rs360 despite the rollover (11.8x Sep-27 target PE). Key risks: Adverse petroleum/gas prices, competition, project delays, and capital misallocation.

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