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Our View 

Petronet LNG's Q1FY25 revealed a stronger performance with an EBITDA and PAT which experienced a growth of 32.3% and 44.5% YoY. The volumes in Q1 saw a commendable 13.9% YoY increase at 262tbtu. Dahej terminal continued to play a crucial role in India's LNG imports, accounting for about ~89% of the total and having ~110% Dahej terminal utilization. The company has provisioned Rs 1.3bn of Use-orPay (UoP) charges as a matter of accounting prudence during Q1FY25. We maintain a REDUCE rating, with an unchanged TP of Rs325, valuing the stock at 12.5x PER. 

Result Highlights 

*  Performance: Petronet’s adjusted revenue was up 15.2% YoY but down 2.7% QoQ, to Rs134.2bn; its EBITDA was up 32.3% YoY and 41.6% QoQ, to Rs15.6bn; its PAT was up 44.5% YoY, 54.8% QoQ, to Rs11.4bn. The other expenses at Rs 3.3bn; were up 166% YoY and 61% QoQ. Overall volumes are higher than our est, EBITDA and PAT are also higher on better volumes and margins on time-based provision of Rs4.9bn.

*  Volumes: The total re-gasified volumes were higher by 13.9% YoY and 12% QoQ, to 262tbtu, of which 248tbtu was from Dahej (at ~111.5% utilization), 14tbtu from Kochi (at 22% utilization). In terms of volume break-up, Dahej’s 97tbtu is longterm, up 7.8% YoY but down 9.3% QoQ, spot 7tbtu and Service 144tbtu, up 17.1% YoY and 33.3% QoQ.  

*  Market Share: India imported ~294tbtu of LNG (per PPAC volumes) in the quarter, improved sequentially on stronger gas demand across sectors, especially power. Petronet’s share was at ~89% on stronger Dahej terminal utilization (81.6% the quarter prior, 89.4% a year ago).

*  Provisions: There is a time-based provision of Rs4.87bn as on 30/6/24 (Rs3.58bn as at 31/3/24) regarding its Use-or-Pay (UoP) charges. As per the settlement agreement for Up dues for CY21 & CY22, one of its customer had bought LNG quantities upto 30/6/24 for which the revenue has been recognized. Correspondingly PLNG has waived off UoP charges amounting to Rs0.63bn by charging it to the P&L. The company has so provisioned Rs 1.3bn of UoP charges as a matter of accounting prudence during Q1FY25.

* Unit margins: The gross margin was Rs74.4/mmbtu; Opex was higher at Rs 14.7/mmbtu while EBITDA was Rs59.7/mmbtu (vs our expectations of 47.9). 

Valuation 

We believe earnings would record a ~6.5% CAGR over FY24-26e, driven by the Dahej utilization and a further ramp-up at Kochi. Large capex under way with Dahej expansion, a greenfield LNG terminal at Gopalpur and foray into petchem which would be the key to monitor as cash on books would be utilized for the same. Long term takeor-pay contracts end in 2036 and Rasgas sourcing contract in 2048, leading to stable long-term volumes. Kochi capacity ramp up was delayed due to lack of evacuation pipeline, however, it has been completed while Kochi-Bengaluru pipeline is still in progress. Dahej and Kochi terminals current capacities are 17.5/5mtpa and the contracted volumes at Dahej/Kochi Terminal are 15.75/1.44mtpa, would lend key support. We expect that petchem margins could be weak and would impact the returns. We maintain a REDUCE rating, with an unchanged TP of Rs325, valuing the stock at 12.5x PER. 

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