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Volume recovery, new capacity key triggers for re-rating

* We recently upgraded PLNG to BUY (Tide is turning, slowly) on inexpensive valuations and strong upcoming capacity growth. In this short note, we reiterate our BUY rating on PLNG and highlight: 1) PLNG’s market share in India’s LNG imports, which slipped to 69% of total imports in FY25 (FY15: 78%), could start to rise as new Dahej capacity starts operations; 2) Assuming a modest 4.5% CAGR in India’s natural gas (NG) consumption over FY25-30 and a 2% CAGR in domestic NG production, India’s LNG imports need to grow at a robust 6% CAGR (~32mmscmd increase in LNG imports over FY25-30), and this should benefit PLNG’s new expanded capacity; 3) Our current assumptions imply that PLNG secures only ~41% share of incremental import growth (69% of total imports in FY25); 4) Global liquefaction capacity is set to rise by 10%/11% YoY in CY26/27 (historical LNG demand growth: 5%-6%), likely ushering in an era of lower-for-longer LNG prices; 5) While brownfield expansion from existing terminals is a risk, we believe this is unlikely to play out given the lackluster utilization at existing facilities.

* As per our DCF analysis (WACC: 10.5%), at CMP, PLNG is pricing in an unrealistic scenario of a 20% decline in tariffs at the Dahej and Kochi terminals in FY28, with no tariff hike thereafter and 0% terminal growth. At 8.9x FY27E P/E and a ~4.3% dividend yield, we believe valuations are at the rock bottom. Reiterate BUY with a DCF-based TP of INR410.

Well-timed expansion to cement leadership in LNG regasification

* Constrained capacity additions drag down PLNG’s market share in India’s LNG imports to 69%: Over the past decade, India’s LNG imports have risen by ~13.7mmt, with LNG now accounting for nearly 50% of the country’s total gas consumption (vs. 35% in FY15). However, with limited regasification capacity additions of just 7.5mmtpa (entirely at Dahej), PLNG’s market share in India’s LNG imports slipped to 69% in FY25 from 78% in FY15.

* Infra moat and cost advantage to help PLNG sustain its dominance: With the upcoming 5mmtpa Dahej expansion (commissioning by Dec’25), the company is strategically positioned to capture the next leg of India’s LNG import growth. Despite new capacity additions like HPCL’s Chhara terminal and expansions such as Dabhol’s 5mmtpa project, we believe PLNG is well positioned to strengthen its market share. Its entrenched infrastructural moat, cost-efficient regas tariffs (driven by low incremental capex), and operational/infra challenges at competing terminals should ensure its continued dominance.

India LNG imports slated to clock a robust 6% CAGR over FY25-30

* India’s LNG imports clocked 7.3% CAGR over FY15-25: Over FY15-25, India’s natural gas (NG) consumption grew by a 3.6% CAGR, reaching 195mmscmd in FY25. With only ~1% CAGR in domestic net NG production, LNG imports grew 250 at a 7.3% CAGR to 98mmscmd.

* CGDs guide for 7-12% YoY NG volume growth over the next few years: PNGRB expects an 8% CAGR in India’s NG consumption over FY24-CY30, primarily driven by 2.5x-3.5x growth in CNG consumption by CY30 from a baseline of ~37mmscmd in FY24. IEA also expects a 6.6% CAGR in India’s NG demand over CY23-30, with a 7.4% CAGR in the CGD sector over CY24-30. Under our coverage universe, over FY26-27, MAHGL/IGL/GUJGA are guiding for a 10%/7%/12% YoY growth in CNG volumes, while GAIL expects a ~8-9mmscmd increase in gas transmission volumes.

* India’s NG demand growth implies 6% CAGR in LNG imports over FY25-30: As per PNGRB, India’s LNG imports are likely to more than double by CY30, driven by robust demand growth and only moderate gains in domestic gas production. IEA also estimates only a 0.6% CAGR in domestic NG production, leading to a 10.5% CAGR in LNG demand, reaching 178mmscmd.

* Over FY25-27, we are building in a ~3% CAGR in NG production for OINL/ONGC, and flat gas production volumes for Reliance. Assuming a modest 4.5% CAGR in India’s NG consumption over FY25-30 and a 2% CAGR in domestic NG production (aggressive assumption), India’s LNG imports need to grow at a robust 6% CAGR during the period (~32mmscmd increase in LNG imports over FY25-30).

Building only ~41% share of incremental import growth for PLNG

* Despite PLNG’s current 69% market share in India’s total LNG imports, we build in only ~41% share of incremental import growth (~13mmscmd). This is a conservative assumption given its unmatched scale, infrastructure advantage, and sticky customer base. With other terminals operating at 20-40% utilization, meaningful new regas capacity is unlikely to come up in the near term. We see PLNG as the structural proxy on India’s LNG-led energy transition.

Anchor customer sign-ups for new capacity key catalyst in FY27

* PLNG has signed a 5.5-year regasification service agreement for the recently expanded 5mmtpa capacity at its Dahej terminal. The contract tenure spans from Jul’26 to Dec’31, with committed volumes of ~0.5mmtpa. The company expects to generate revenue of ~INR12b over the contract period through regasification, storage, and facility charges (implying tariff of ~INR93.1/mmbtu), with estimated EBITDA margins of ~90%.

* The agreement covers 10% of the total expanded capacity (we build in 15%/29% capacity utilization from the expanded capacity in FY27/28). Further, PLNG is actively pursuing additional offtake agreements for the expanded Dahej capacity. We believe that over the next 12-18 months, PLNG is likely to secure more long-term contracts, which could improve visibility on volume ramp-up and earnings sustainability, serving as a significant catalyst for the stock.

Global LNG export capacity to rise by ~54% over CY25-30

* Global liquefaction capacity is set to rise by 10%/11% YoY in CY26/27: As per IEA, between CY25 and CY30, ~295bcm (54% of current capacity) of new LNG export capacity is projected to come online from projects that have already reached final investment decision (FID) or are currently under construction. Annual liquefaction capacity additions are projected to rise steadily from ~33bcm in CY25 (6% of current capacity) to a peak of ~70bcm (13% of current capacity) in CY27, before moderating during CY28-30. This marks the largest capacity additions in any five-year period in the history of the LNG market.

* Stalled 67bcm LNG projects could unlock significant supply upside: Notably, this estimate excludes potential additions from Russia’s Arctic LNG 2 (27bcm/year), Mozambique LNG (18bcm/year), and Qatar’s North Field West expansion (22bcm/year), all of which have been approved but are not progressing toward commercial operations due to various delays and challenges.

* LNG prices to remain under pressure in CY26 and beyond: Historically, global LNG demand has seen a CAGR of 5-6% vs. liquefaction capacity CAGR of 7.5% during CY24-30. As such, we expect global LNG prices to come under pressure in CY26 and beyond.

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