Hold Petronet LNG; target of Rs 245: ICICI Direct
ICICI Direct’s research report on Petronet LNG
Petronet LNG reported its Q4FY19 results, which were below our estimates on the profit front, mainly due to inventory losses of ~Rs 119 crore on spot volumes. The topline declined 2.9% YoY to Rs 8,383.2 crore mainly on account of lower realisations. Volumes declined 3.6% YoY and came in largely in line with our estimates at 205.1 tbtu (our estimate: 203.2 tbtu). EBITDA at Rs 627.2 crore came in below our estimate of Rs 832.8 crore mainly on account of inventory losses. As a result, blended margins of Rs 41.2/mmbtu were below our estimate of Rs 48.5/mmbtu. On the profitability front, PAT during the quarter declined 15.8% YoY to Rs 440.2 crore, below our estimate of Rs 561.7 crore.
Petronet LNG provides comfort on the business model and remains a structural story of India’s increasing gas demand. With India continuing to be short of natural gas supply, Petronet LNG will benefit as the primary play on increasing usage of LNG in the long term. However, in the near term, on account of lower ramp-up in volumes, we value Petronet LNG at 13x FY21E EPS of Rs 18.9 to arrive at a price target of Rs 245 with a HOLD rating.
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