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We upgrade PLNG to BUY from Add and raise our TP by 16% to Rs425/sh. We reiterate our positive view on the back of a steady outlook and attractive valuation. While the high Dahej utilization of Q1, driven by the power sector has cooled-off, we believe ~100% utilization is achievable for remainder of the fiscal. The commencement and ramp up of Exxon’s second 1.2mmtpa term contract with higher Kochi tariff in FY26-27, leads to our EPS increasing 7-9% for that period. PLNG’s tariff outlook following QatarGas renewal in CY28 has been a concern with offtakers seeking downward adjustments. However, the management has reiterated any cut won’t be material and minority shareholder interests would be protected. We build in reasonable assumptions, but still see value in the stock. We value PLNG at 15x Sep-26E EPS (vs DCF earlier).

Steady core performance; Exxon supplies to ramp up from FY26E Against >110% capacity utilization of Dahej terminal in Q1FY25, Q2 would be seasonally weaker, but we expect a utilization closer to 100%, which implies a full year run-rate of >100%. Kochi is also expected to see ramp up from Mangalore customers. Hence, our FY25E EPS outlook is intact and we have increased it by a slight 3%. In FY26-27, Exxon’s 1.2mmtpa second contract would commence (0.5/1.2mmtpa FY26/27), while Dahej expansion of 5mmtpa would also be commissioned. This should lead to volume growth continuing for PLNG with Exxon volumes clocking higher Kochi terminal tariffs. We, therefore, raise our FY26/27E EPS by 7%/9%.

Too much worry on long-term uncertainties, new triggers still present There seem to be concerns wrt Dahej tariff adjustment and destination flexibility for offtakers after the QatarGas contract renewal in CY28. However, PLNG’s management has reiterated any tweaking in tariffs would be minor and not affect minority shareholder interests (offtakers are also promoters for PLNG), and also that destination clause is within PLNG’s own terminals (i.e. Dahej, Kochi, and Gopalpur) hence, there won’t be any loss in business. We believe such long-term uncertainties are there in every business and need not be overplayed; positive triggers like LNG Retail and C2-C3 are also there.

See value in stock under reasonably conservative assumptions We note that PLNG has 7.5mmtpa of QatarGas contract, 8.25mmtpa of tolling and 2.6mmtpa of Exxon (Gorgon) contracts. Of this, the 7.5mmtpa has tariff adjustment risks while hikes should continue for the other two. Assuming a scenario where Kochi tariff is cut by ~10% in FY27 due to Exxon volumes and Dahej 7.5mmtpa is cut by 10% in FY29 along with a 2-3% annual tariff hike for the next 10 years, our DCF value for the stock still increases to Rs400/sh from Rs365/sh earlier. However, we move to a P/E-based valuation to cut overdependence on long-term DCF assumptions and value PLNG at 15x Sep-26E EPS to arrive at TP of Rs425/sh. We, therefore, upgrade PLNG to BUY from Add.

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