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Our View

Petronet LNG's Q3FY24 revealed a mixed performance with a 10.4% YoY drop in adjusted revenue, while re-gasified volumes saw a commendable 39% YoY increase. However, EBITDA and PAT experienced declines of 35% and 37% YoY. Dahej terminal played a crucial role in India's LNG imports, accounting for about 86.1% of the total and having ~98% Dahej terminal utilization. Despite this notable increase, the adjusted gross margin has seen a reduction. The higher expenses and the profitability were primarily driven by use or pay one off income and expenses. The stock price has had a sharp rally, we downgrade the rating to a SELL from REDUCE earlier, with a TP of Rs229, valuing the stock at 10x PER.

Result Highlights

* Adjusted Performance: Petronet’s adjusted revenue was down 10.4% YoY but up 12.8% QoQ, to Rs141.4bn; its EBITDA was down 35% YoY and 10% QoQ, to Rs11bn; its PAT was down 37% YoY, 10% QoQ, to Rs7.4bn. The other expenses at Rs 3.7bn; was up 87% YoY and 125% QoQ. Overall volumes are in line to our estimates, EBITDA and PAT are lower on higher opex due to use or pay provisions.

* Volumes: The total re-gasified volumes were higher by 39% YoY and 4% QoQ, to 232tbtu, of which 218tbtu was from Dahej (at ~98% utilization), 14tbtu from Kochi (at 22% utilization). In terms of volume break-up, Dahej’s 104btu is long-term, flat YoY and up 2% QoQ, spot 4tbtu and Service 110tbtu, up 134% YoY and 7.8% QoQ.

* India imported ~269tbtu of LNG (per PPAC volumes) in the quarter. Petronet’s share was at ~86.1% on stronger Dahej terminal utilization (86% the quarter prior, 64% a year ago).

* The adjusted gross margin was Rs65.5/mmbtu; Opex was higher at Rs 18.2/mmbtu while EBITDA was Rs47.2/mmbtu (Rs54.5 and Rs49.5 the previous quarter).

* 9MFY24 performance: Overall volumes was at 685tbtu vs 567tbtu in 9MFY23. Dahej volumes at 645tbtu was up 21% YoY; Kochi at 40tbtu up 14.3% YoY. EBITDA at Rs 34.9bn vs Rs 39.1bn in 9MFY23; PAT at Rs 23.5bn vs Rs 26.3bn in 9MFY23.

Valuation

We believe earnings would record a ~2% CAGR over FY23-26, driven by the Dahej utilisation and a further ramp-up at Kochi. We downgrade the rating to a SELL from REDUCE earlier, with a TP of Rs229, valuing the stock at 10x PER.

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